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Quiz #11: PRACTICE - micro Oligopoly



Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 

Which of the following is unique to oligopoly among all the market structures?
a.
product differentiation
b.
profit maximization
c.
mutual interdependence between firms
d.
advertising
e.
long-run economic profits
 

 2. 

An oligopoly can be identified because
a.
each firm’s strategy depends on each of the small number of other firms.
b.
there is only one firm, but it has no barriers to entry
c.
a large number of small firms
d.
while there is a small number of firms, each firm’s makes decisions without regard for what the other firms do.
e.
a large number of very large firms.
 

 3. 

The automobile, breakfast cereal, and tobacco industries are examples of
a.
monopolistic competition
b.
oligopoly
c.
perfect competition
d.
monopoly
e.
monopsony
 

 4. 

The defining characteristic of oligopoly is that each firm
a.
produces the same output as its rivals
b.
acts independently of its rivals
c.
is mutually interdependent
d.
is atomistic
e.
advertises how its products are different from its rivals' products
 

 5. 

The movie industry (“Hollywood”) consists of just a few very large studios who control the distribution of all major motion pictures.  Hollywood is constantly “buzzing” with rumors about what each studio is planning to release and when.  Hollywood studios have been frequent targets of anti-trust lawsuits in the past.  What market structure best describes this industry?
a.
perfect competition
b.
monopolistic competition
c.
monopoly
d.
oligopoly
e.
monopsony
 

 6. 

Consider the beer industry.  Despite the large number of brands and flavors, and despite the emergence of so-called “micro breweries”, it is increasingly becoming dominated by a small number of large brewing companies.  At one time, every major city had it’s own local brewer and sometimes several. But, as of 2004, a wave of mergers in the world-wide brewing industry meant that over 50% of all beer sold is now brewed by less than 10 companies.  The beer industry is moving from _________ to being ____________.
a.
perfect competition;  monopoly
b.
monopolistic competition;  oligopoly
c.
monopoly;  oligopoly
d.
oligopoly;  monopolistic competition
e.
monopolistic competition;  perfect competition
 

 7. 

Two heavy equipment manufacturers might collude in an effort to do all of the following except one. Which is the exception?
a.
determine a more advantageous price and quantity
b.
prevent new entry into the market
c.
take advantage of the legal benefits that U.S. cartels receive
d.
increase their combined profits
e.
predict the behavior of other competitors in the heavy equipment market with greater certainty
 

 8. 

Collusion occurs when
a.
a firm chooses a level of output to maximize its own profit
b.
firms get together to maximize joint profits
c.
firms refuse to follow their price leaders
d.
firms petition their U.S. senators for favors
e.
two firms' price and output decisions come into conflict
 

 9. 

A cartel is an organization of firms
a.
dominated by one firm, which is usually referred to as the price leader.
b.
that attempts to increase total (or industry) demand for their product.
c.
that reduces output and increases price in an effort to increase joint profits.
d.
that deliberately attempts to disrupt the market for political reasons.
 

 10. 

If all six suppliers of cement to Metropolis sign an agreement that establishes an agreed-upon price of $45 per ton, this would be
a.
a legal contract
b.
price discrimination
c.
cost-plus pricing
d.
a cartel
e.
beneficial to consumers
 

 11. 

Strategic behavior, the situation where each decision-maker’s decisions directly affects the other decision-makers’ outcomes, is analyzed in economics using
a.
the P=MR=MC model
b.
game theory.
c.
production theory.
d.
consumer theory.
e.
monetary dynamics
 

 12. 

The principal advantage of the game theory approach is that it allows us to
a.
take all possible information into consideration before developing a theory
b.
better understand why the firm in a competitive industry avoids games
c.
better understand how the government should regulate a natural monopoly
d.
better understand decision making when one persons choices affect another persons choices
e.
understand the relationship between the firm and the industry demand curves
 

 13. 

The "prisoner's dilemma" game illustrates a case in which
a.
individually rational behavior leads to a collectively inefficient outcome.
b.
what is irrational individual behavior turns out to be ultra-irrational group behavior.
c.
the whole is greater than the sum of the parts.
d.
you can do better by yourself if you do worse by others.
e.
none of the above
 

 14. 

In the prisoner's dilemma, each prisoner chooses to  ________ because it is __________ .  The eventual outcome is __________.
a.
confess; the best for them individually; the best possible joint outcome.
b.
confess;  the best for the group; the worst possible joint outcome.
c.
confess; the best for them individually; the worst possible joint outcome.
d.
not confess; the best for them individually; the best possible joint outcome.
e.
not confess; the best for the group; the best possible joint outcome.
f.
not confess; the best for them individually; the worst possible joint outcome.
 

 15. 

The prisoner's dilemma provides an explanation for
a.
the lack of price competition in oligopoly
b.
the ability of firms in an oligopoly to extract the entire consumer surplus
c.
why monopoly firms are profitable
d.
the failure of firms in non-competitive industries to maximize profits
e.
why firms in oligopoly may find it difficult to act as a “shared monopoly”
 

 16. 

The outcome of competition in oligopoly is
a.
harder to predict than in other market structures
b.
very likely to be the same as in perfect competition
c.
nearly always the same outcome as monopoly
d.
easier to predict than in any other market structure
e.
determined by government planning
 

 17. 

Oligopoly often leads to firm strategies that are inefficient and harmful to consumers.  Examples of such strategies include
a.
collusion
b.
product differentiation
c.
price-fixing
d.
a and b only
e.
a and c only
 



 
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