Question 1

Refer to the above payoff matrix (in years of sentence)  for two people (Bo and Max)  charged for robbery. Which of the following is the outcome of the dominant strategy without cooperation?

Accepted Answer

A)   Both Bo and Max confess.
B)   Both Bo and Max do not confess.
C)   Bo confesses while Max does not confess.
D)   Bo does not confess while Max confesses.E) A) and B)
F) A) and C)

Question 2

Which of the following has the highest Herfindahl-Hirschman index?

Accepted Answer

A)   monopoly
B)   monopolistic competition
C)   oligopoly
D)   any of the above, depending on the size of firm salesE) B) and C)
F) A) and D)

Question 3

The higher the concentration ratio is in an industry, the more likely it is that

Accepted Answer

A)   the industry is perfectly competitive.
B)   the market share of the smallest four firms is larger.
C)   the market share of the largest four firms is smaller.
D)   the industry has an oligopoly.E) All of the above
F) B) and D)

Question 4

-According to the above table, the four-firm concentration ratio of this industry is

Accepted Answer

A)   69.2 percent.
B)   35.1 percent.
C)   66.7 percent.
D)   67.5 percent.E) None of the above
F) A) and B)

Question 5

A merger between firms that are in the same industry is called a

Accepted Answer

A)   conglomerate merger.
B)   horizontal merger.
C)   vertical merger.
D)   none of the above.E) All of the above
F) A) and B)

Question 6

The joining of firms that are producing or selling a similar product is

Accepted Answer

A)   competition by merger.
B)   a vertical merger.
C)   a horizontal merger.
D)   a hostile takeover.E) A) and B)
F) B) and C)

Question 7

Suppose there are four firms in an industry. The market shares of the four firms are 5 percent, 20 percent, 35 percent, and 40 percent. The Herfindahl-Hirschman index for that industry is

Accepted Answer

A)   6,650.
B)   3,250.
C)   1,250.
D)   100.E) A) and B)
F) B) and D)

Question 8

If industry sales are $2,000, and the top four firms have sales of $170, $140, $100, and $80, respectively, what will be the four-firm concentration ratio?

Accepted Answer

A)   49 percent
B)   24.5 percent
C)   490 percent
D)   200/49E) None of the above
F) All of the above

Question 9

After participating members of a cartel form an agreement on common prices and output quotas, then an individual firm can increase its own profits by

Accepted Answer

A)   increasing production.
B)   increasing prices.
C)   leaving the cartel.
D)   incurring higher input costs.E) C) and D)
F) A) and B)

Question 10

Which of the following is NOT a necessary condition for oligopoly?

Accepted Answer

A)   Barriers to entry
B)   Strategic dependence of firms
C)   Differentiated products
D)   Either a small number of firms or market dominance by a small number of firmsE) A) and C)
F) All of the above

Question 11

Within a game theory model, if a change in decision-making raises corporation A's profits by $50 and lowers corporation B's profits by $60, the game is a

Accepted Answer

A)   negative-sum game.
B)   zero-sum game.
C)   positive-sum game.
D)   cooperative game.E) All of the above
F) A) and B)

Question 12

Cheating in a cartel is more likely to occur if the industry

Accepted Answer

A)   has a large number of firms.
B)   has homogeneous products.
C)   has easily observable prices
D)   has little variation in prices.E) None of the above
F) A) and B)

Question 13

Which of the following is NOT a condition that helps enforce a cartel agreement?

Accepted Answer

A)   a small number of firms
B)   nearly homogeneous products
C)   easily observable prices
D)   large variation in input pricesE) A) and D)
F) A) and C)

Question 14

A network effect exists whenever

Accepted Answer

A)   a firm's willingness to produce a particular good or service is influenced by the costs of inputs it must utilize in order to manufacture the item.
B)   a consumerʹs willingness to purchase a particular good or service is influenced by how many others also buy or have bought the item.
C)   a firm's willingness to purchase a particular factor of production depends on the other types of inputs it utilizes to manufacture an item.
D)   a consumer's willingness to purchase a particular good or service is influenced by the prices of other complementary or substitute items.E) B) and D)
F) A) and B)

Question 15

Between World War II and the 1970s, three firms-General Motors, Chrysler, and Ford-produced and sold nearly all the output of the U.S. auto industry. These three firms had

Accepted Answer

A)   an oligopoly.
B)   monopolistic competition.
C)   colluded.
D)   a pure monopoly.E) A) and C)
F) A) and D)

Question 16

In a "game," strategies are

Accepted Answer

A)   the reactions of firms to the changes in the economy.
B)   the laws regulating the industry.
C)   the plans made by the participants.
D)   the potential returns the participants may get.E) B) and D)
F) None of the above

Question 17

Which of the following is likely among the most concentrated industries in the United States?

Accepted Answer

A)   printing and publishing
B)   breakfast cereals
C)   primary aluminum
D)   computersE) B) and D)
F) None of the above

Question 18

The prisoners' dilemma is a game in which

Accepted Answer

A)   the dominant strategy for all participants is to choose a strategy that makes them all worse off.
B)   the dominant strategy is to cooperate.
C)   only one of the firms is able to make above-normal profits.
D)   each firm, in making decisions on the basis of its own self-interest, also makes decisions that benefit the group as a whole.E) All of the above
F) A) and B)

Question 19

A local utility is an example of

Accepted Answer

A)   perfect competition.
B)   oligopoly.
C)   monopoly.
D)   monopolistic competition.E) A) and D)
F) All of the above

Question 20

If Ford Motor Company and General Motors Corporation were to merge, this would represent

Accepted Answer

A)   a vertical merger.
B)   a horizontal merger.
C)   a cartel.
D)   an up-and-down merger.E) B) and C)
F) A) and B)

Exam 26: Oligopoly and Strategic Behavior

Which of the following is NOT a necessary condition for oligopoly?

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Which of the following is likely among the most concentrated industries in the United States?

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Suppose there are four firms in an industry. The market shares of the four firms are 5 percent, 20 percent, 35 percent, and 40 percent. The Herfindahl-Hirschman index for that industry is

Correct AnswerverifiedShow Answer

-According to the above table, the four-firm concentration ratio of this industry is

Correct AnswerverifiedShow Answer

After participating members of a cartel form an agreement on common prices and output quotas, then an individual firm can increase its own profits by

Correct AnswerverifiedShow Answer

If Ford Motor Company and General Motors Corporation were to merge, this would represent

Correct AnswerverifiedShow Answer

Within a game theory model, if a change in decision-making raises corporation A's profits by $50 and lowers corporation B's profits by $60, the game is a

Correct AnswerverifiedShow Answer

In a "game," strategies are

Correct AnswerverifiedShow Answer

Which of the following has the highest Herfindahl-Hirschman index?

Correct AnswerverifiedShow Answer

The joining of firms that are producing or selling a similar product is

Correct AnswerverifiedShow Answer

The prisoners' dilemma is a game in which

Correct AnswerverifiedShow Answer

Between World War II and the 1970s, three firms-General Motors, Chrysler, and Ford-produced and sold nearly all the output of the U.S. auto industry. These three firms had

Correct AnswerverifiedShow Answer

Cheating in a cartel is more likely to occur if the industry

Correct AnswerverifiedShow Answer

The higher the concentration ratio is in an industry, the more likely it is that

Correct AnswerverifiedShow Answer

Which of the following is NOT a condition that helps enforce a cartel agreement?

Correct AnswerverifiedShow Answer

Refer to the above payoff matrix (in years of sentence) for two people (Bo and Max) charged for robbery. Which of the following is the outcome of the dominant strategy without cooperation?

Correct AnswerverifiedShow Answer

A network effect exists whenever

Correct AnswerverifiedShow Answer

A local utility is an example of

Correct AnswerverifiedShow Answer

A merger between firms that are in the same industry is called a

Correct AnswerverifiedShow Answer

If industry sales are $2,000, and the top four firms have sales of $170, $140, $100, and $80, respectively, what will be the four-firm concentration ratio?

Correct AnswerverifiedShow Answer

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