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Chapter 26 Oligopoly and Strategic Behavior 743
6) A Battle of the Sexes outcome occurs when
A) firms earn highest profits by adopting different product formats.
B) firms earn highest profits by trying to coordinate but cannot agree on how to do so.
C) firms earn highest profits by adopting either male or female product formats.
D) firms cooperate as long as other firms cooperate, but if anyone cheats, they cut the price
until the cheater reverts to cooperation.
7) The situation in which firms wish to coordinate but cannot agree on how to do so is called
A) the prisoners dilemma. B) a Tweedle Dee Tweedle Dum game.
C) Battle of the Sexes. D) a cartel.
8) Which of the following games yields an outcome in which two firms would simultaneously be
willing to adopt a compatible product format?
A) the prisoners dilemma B) Tweedle Dee Tweedle Dum
C) Battle of the Sexes D) none of the above
9) Which of the following best describes the Battle of the Sexes?
A) Two firms choose incompatible product formats.
B) Two firms choose one compatible product format.
C) Two firms wish to coordinate on one compatible product format but cannot agree on
which one.
D) Two firms choose to engage in a noncooperative game.
10) Which of the following best describes the Tweedle Dee Tweedle Dum outcome?
A) Two firms choose incompatible product formats.
B) Two firms choose one compatible product format.
C) Two firms wish to coordinate on one compatible product format but cannot agree on
which one.
D) Two firms choose to engage in a noncooperative game.
11) In the Battle of the Sexes, profits are the highest if
A) the two firms choose incompatible product format.
B) the two firms choose to adopt one particular product format.
C) the two firms do not cooperate on the product format.
D) none of the above
12)
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two
product formats (A and B) in an industry. A possible outcome of the dominant strategy is:
A) Both firm X and firm Y choose product format A.
B) Both firm X and firm Y choose product format B.
C) Firm X would be willing to choose product format A while firm Y simultaneously would
wish o choose product format B.
D) Firm X would be willing to choose product format B as long as firm Y wishes
simultaneously also to choose product format B.
13)
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two
product formats (A and B) in an industry. The game with the dominant strategy is also called:
A) Battle of the Sexes. B) Tit for Tat.
C) Tweedle Dee Tweedle Dum. D) the prisoners dilemma.
14)
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two
product formats (A and B) in an industry. A possible outcome of the dominant strategy is:
A) Both firm X and firm Y would be willing to choose product format A.
B) Neither firm X nor firm Y would be willing to choose product format B simultaneously.
C) Firm X chooses product format A while firm Y chooses product format B.
D) Firm X chooses product format B while firm Y chooses product format A.
15)
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two
product formats (A and B) in an industry. A possible outcome of the dominant strategy is:
A) Both firm X and firm Y choose product format A.
B) Both firm X and firm Y choose product format B.
C) Firm X would be willing to choose product format A while firm Y simultaneously would
wish o choose product format B.
D) Firm X would be willing to choose product format B as long as firm Y wishes
simultaneously also to choose product format B.
16)
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two
product formats (A and B) in an industry. The game with the dominant strategy is also called:
A) Battle of the Sexes. B) the prisoners dilemma.
C) Tit for Tat. D) Tweedle Dee Tweedle Dum.
17)
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two
product formats (A and B) in an industry. The game with the dominant strategy is also called
A) the prisoners dilemma. B) Tweedle Dee Tweedle Dum.
C) Pure Coordination Game. D) Tit for Tat.
18) If two goods are complementary, then they have a
A) low degree of product compatibility. B) high degree of product compatibility.
C) high degree of negative network effect. D) low degree of negative network effect.
19) If the product of one firm is complementary to another product of another firm, then the two
products
A) are compatible. B) are substitutable.
C) have a zero network effect. D) have a negative network effect.
20) By reducing the product compatibility of iPod, Apple can lower the price elasticities of demand
for
A) Apple products that are complementary to the iPod.
B) Apple products that are substitutable to the iPod.
C) products by other firms that have a positive network effects.
D) products that are not related to the iPod.
21) An industry battle between incompatible product formats can occur if competing firms selling
compatible products
A) take into account network effects.
B) fail to take into account network effects.
C) take into account economies of scale.
D) fail to take into account economies of scale.
22)
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two
product formats (A and B) in an industry. A possible outcome of the dominant strategy is:
A) Both firm X and firm Y choose product format A.
B) Both firm X and firm Y choose product format B.
C) Firm X would be willing to choose product format A as long as firm Y simultaneously
would be willing to choose format A.
D) Firm X would be willing to choose product format A, while firm Y simultaneously would
be willing to choose format B.
23)
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two
product formats (A and B) in an industry. The game with the dominant strategy is also called:
A) the prisoners dilemma. B) Tweedle Dee Tweedle Dum.
C) Battle of the Sexes. D) Tit for Tat.
24) Which of the following would NOT be an adequate description of the relationship between
Blu Ray discs and Blu Ray disc players?
A) They are compatible. B) They are complementary.
C) They involve network effects. D) They are substitutable.
25) Which of the following is the reason why the product incompatibility strategy worked for
Apple s iPod in the media industry but did not work for Sony s Beta videocassettes in the
videocassette industry?
A) Both media and videocassette industries were subject to positive market feedback.
B) Both media and videocassette industries were subject to negative market feedback.
C) The media industry was subject to positive feedback but the videocassette industry was
subject to negative market feedback.
D) The media industry was subject to negative market feedback but the videocassette
industry was subject to positive market feedback.
26) A Tweedle Dee Tweedle Dum game situation occurs when
A) two firms choose incompatible product formats.
B) two firms choose compatible product formats.
C) two firms produces products that are complementary to each other s products.
D) the game is a positive sum.
27) Which of the following provides firms incentives to work together to develop one common
product format?
A) a Tweedle Dee Tweedle Dum game B) a Battle of the Sexes game
C) prisoners dilemma D) none of the above
28) A firm should always make complementary products incompatible with those of other firms.
Do you agree or disagree? Why?
29) According to the textbook, what is the reason for the success of Apple s strategy of opting for
product incompatibility for its iPod but the failure of Sony s same strategy for its Beta
videocassettes?
Chapter 26 Oligopoly and Strategic Behavior 751
26.6 Comparing Market Structures
1) A market situation in which there are a few large firms is called
A) monopolistic competition. B) imperfect competition.
C) oligopoly. D) monopoly.
2) In industries in which strong network effects exist, which industry structure is likely to emerge?
A) Perfect competition B) Monopoly
C) Monopolistic competition D) Oligopoly
3) Game theory is used to explain the pricing behavior of
A) monopolies. B) perfect competition.
C) monopolistic competition. D) oligopolies.
4) Strategic dependence is found in
A) monopoly markets. B) oligopolistic markets.
C) monopolistic competitive markets. D) perfect competitive markets.
5) A given industry, Z, is such that the 1 firm, 2 firm, 4 firm and 8 firm concentration ratios are
the same. Based on this, we can conclude that Industry Z is
A) pure competition. B) monopolistic competition.
C) oligopoly. D) pure monopoly.
6) Industry X comprises only very few large firms engaged in stiff competition with each other.
Industry X can best be described as
A) pure competition. B) monopolistic competition.
C) pure monopoly. D) oligopoly.
7) Interdependence is the key characteristic of
A) perfect competition. B) monopolistic competition.
C) oligopoly. D) monopoly.
8) A market situation in which there are a few firms that recognize their mutual interdependence
is
A) monopolistic competition. B) oligopoly.
C) monopoly. D) regulated monopoly.
9) A market situation in which there are very few sellers is
A) oligopoly. B) perfect competition.
C) monopoly. D) monopolistic competition.
10) For which market structure do economists have the least precise model of price determination?
A) Perfect competition in the short run B) Perfect competition in the long run
C) Oligopoly D) Monopoly
11) Product differentiation exists in
A) oligopolies only.
B) monopolies only.
C) monopolistic competition only.
D) all market structures except perfect competition.
12) Other things being equal, which market structure would produce the least output and the
highest average product price?
A) Monopoly B) Oligopoly
C) Monopolistic competition D) Perfect competition
13) Other things being equal, which market structure is most likely to yield the greatest industry
long run economic profit?
A) Monopolistic competition B) Oligopoly
C) Monopoly D) Perfect competition
14) In which market structure does a firm have the LEAST influence over the market price?
A) Monopoly B) Monopolistic competition
C) Oligopoly D) Perfect competition
15) Product differentiation always exists in
A) perfect competition. B) monopolistic competition.
C) oligopoly. D) monopoly.
16) Firms face downward sloping demand curves in
A) monopolies only.
B) monopolies and oligopolies only.
C) monopolies and oligopolies that collude only.
D) all market structures except perfect competition.
17) If we observe firms earning zero economic profits in the short run, we know that
A) the industry must be perfectly competitive.
B) the industry must be either perfectly competitive or monopolistically competitive.
C) there must not be any barriers to entry.
D) any market structure is possible since firms under any market structure can earn zero
profits at some time.
18) The market structure of oligopoly is when
A) there are a small number of interdependent firms that constitute the entire market.
B) there is a single producer of a product.
C) there are many producers of a differentiated product.
D) there are many producers of a homogeneous product.
19) The market structure of monopoly exists when
A) there are a small number of interdependent firms that constitute the entire market.
B) there is a single producer of a product.
C) there are many producers of differentiated products.
D) there are many producers of a homogeneous product.
20) The market structure of monopolistic competition exists when
A) there are a small number of interdependent firms that constitute the entire market.
B) there is a single producer of a product.
C) there are many producers of differentiated products.
D) there are many producers of a homogeneous product.
21) The market structure of perfect competition exists when
A) there are a small number of interdependent firms that constitute the entire market.
B) there is a single producer of a product.
C) there are many producers of differentiated products.
D) there are many producers of a homogeneous product.
22) In which market structures is the firm able to earn long run economic profits?
A) Perfect competition and monopolistic competition.
B) Monopolistic competition and oligopoly.
C) Oligopoly and monopoly.
D) Monopolistic competition, oligopoly and monopoly.
23) In which market structures does a firm have at least some ability to set the market price?
A) Perfect competition and monopolistic competition.
B) Monopolistic competition and oligopoly.
C) Oligopoly and monopoly.
D) Monopolistic competition, oligopoly and monopoly.
24) In which market structures do firms engage in nonprice competition?
A) Perfect competition and monopolistic competition
B) Monopolistic competition and oligopoly
C) Oligopoly and monopoly
D) Perfect competition and monopoly
25) In which market structures do firms earn long term profits of zero?
A) Perfect competition and monopolistic competition
B) Monopolistic competition and oligopoly
C) Oligopoly and monopoly
D) Perfect competition and monopoly
26) In which market structures is there product differentiation?
A) Perfect competition and monopolistic competition
B) Monopolistic competition and oligopoly
C) Oligopoly and monopoly
D) Perfect competition and monopoly
27) Monopolistically competitive markets and oligopolies are similar in that
A) the number of firms is identical.
B) the kinked demand curve can be used to analyze the firms pricing decisions.
C) there is mutual interdependence amongst the firms.
D) nonprice competition is a tool used.
28) A market with many sellers, no influence over price, no barriers to entry, a homogeneous
product, and an absence of non price competition is known as
A) perfect competition. B) monopolistic competition.
C) oligopoly. D) monopoly.
29) A market with many sellers, some influence over price, low barriers to entry, a differentiated
product, and non price competition often taking the form of advertising is known as
A) perfect competition. B) monopolistic competition.
C) oligopoly. D) monopoly.
30) A market with few sellers, some influence over price, high barriers to entry, a differentiated
product, and non price competition is known as
A) perfect competition. B) monopolistic competition.
C) oligopoly. D) monopoly.
31) A market with one seller, considerable influence over price, high barriers to entry, a
homogeneous product, and non price competition to allow for price discrimination is known as
A) perfect competition. B) monopolistic competition.
C) oligopoly. D) monopoly.
32) Which is FALSE about perfect competition?
A) There are numerous sellers.
B) Market entry and exit is unrestricted.
C) There is no ability to set price.
D) There is considerable product differentiation.
33) All of the following are true regarding oligopoly EXCEPT
A) there are few sellers. B) there is some ability to set price.
C) there is no competition. D) entry and exit is partially restricted.
34) Which of the following is NOT a characteristic of pure monopoly?
A) many sellers B) considerable price setting ability
C) restricted ability to enter market D) long run economic profits are possible
35) Long run economic profits are possible under
A) perfect competition and oligopoly.
B) monopolistic competition and monopoly.
C) oligopoly and monopoly.
D) monopolistic competition and oligopoly.
36) Retail trade is an example of
A) perfect competition. B) oligopoly.
C) monopoly. D) monopolistic competition.
37) Agriculture is an example of
A) perfect competition. B) oligopoly.
C) monopoly. D) monopolistic competition.
38) The college textbooks market is an example of
A) perfect competition. B) oligopoly.
C) monopoly. D) monopolistic competition.
39) A local utility is an example of
A) perfect competition. B) oligopoly.
C) monopoly. D) monopolistic competition.
40) Unrestricted entry and exit into the market is found in
A) perfect competition and monopolistic competition.
B) perfect competition and oligopoly.
C) monopolistic competition and oligopoly.
D) perfect competition, monopolistic competition and oligopoly.
