Which of the following is a key characteristic of an oligopoly?
a) The firms in an oligopoly are mutually interdependent.
b) There are a small number of buyers in an oligopoly market.
c) There are a large number of firms in an oligopoly market.
d) Firms in an oligopoly market earn zero economic profit.
e) There are no entry barriers in an oligopoly market.
During the 1990s, the U. S. cigarette industry was dominated by four major firms that charged similar prices for the cigarettes they sold under a variety of brand names. When one firm raised its prices, the other firms generally followed. The cigarette industry is best characterized as:
a) an oligopoly
b) a monopolistically competitive industry
c) a monopoly
d) a perfectly competitive industry
e) a duopoly
The concentration ratio for an industry with four firms shows the:
a) percentage of sales accounted for by the four firms.
b) total market capitalization of the four firms.
c) percentage of profits accounted for by the four firms.
d) total quantity of output of the four firms.
e) total costs of production of the four firms.
The laundry machine industry has a four-firm concentration ratio of 98%. Based on this information, we can conclude that:
a) each firm in the laundry machine industry has an equal share of the market.
b) the laundry machine industry is a tight oligopoly.
c) the laundry machine industry is monopolistically competitive.
d) the top four firms in the laundry machine industry have a high market capitalization.
e) the laundry machine industry is perfectly competitive.
When the four-firm concentration ratio is less than 40 percent, we can conclude that:
a) the four dominant firms in the industry enjoy a high degree of market power.
b) the industry is a tight oligopoly.
c) the market shares of each firm in the industry are highly unequal.
d) the industry is monopolistically competitive.
e) the industry is competitive.
Which of the following statements is true?
a) The higher the market concentration, the lower the price in the market.
b) An increase in market concentration will lead to an increase in prices and profits.
c) A decrease in market concentration will lead to a decrease in efficiency.
d) Market concentration and profits are independent of each other.
e) The larger the concentration ratio, the higher the number of firms in the market.
During the 1990s, one of the dominant firms in the U.S. cigarette industry would raise prices once or twice a year by about 50 cents per carton. Other firms in the industry typically raised their prices by the same amount. This is an example of:
a) predatory pricing
b) price skimming
c) price leadership
d) profit maximization
e) a kinked demand curve
Some years ago, the three leading aluminum producers in the U.S. changed prices nine times by exactly the same amount each time and usually within one to three days of the initial price increase. This is an example of _____.
a) sequential pricing
b) price leadership
c) price discrimination
d) tacit collusion
e) price fixing
Which of the following correctly explains the dominant firm model of an oligopoly?
a) The firm that sets the lowest price gains the entire market share.
b) A single firm sets a price which is lower than the current market price and gains market share at the expense of the other firms.
c) A single firm sets the price in the market, which is taken as given by the other smaller firms.
d) Each firm in the market sets its price based on the reaction of the other firm.
e) The firms in the market collude and set prices in order to maximize their combined profits.
C
The quantity that is set by the dominant firm in an oligopolistic industry:
a) is based on the price set by other firms.
b) is at the level where its marginal revenue and marginal cost are equal.
c) is equal to the total industry output.
d) ensures that there is zero economic profit in the industry.
e) is equal to the output produced in a perfectly competitive industry
The demand function in a duopoly is: P = 100 – 2(Q1 + Q2). If the first firm decides to sell 10 units while the second firm sells 20 units, which of the following will be true?
a) The second firm will earn twice as much revenue as the first firm.
b) The second firm will sell at a lower price than the first firm.
c) An increase in one firm’s output will not affect the other firm’s revenue.
d) The first firm will earn a higher profit than the second firm.
e) The market price will be determined by the second firm’s output which is larger than the first firm’s output.
Which of the following is true of the Cournot model of a duopoly?
a) The products sold by the firm are imperfect substitutes.
b) The equilibrium price in a Cournot duopoly is higher than the price in a monopoly.
c) The demand curve facing each firm is horizontal.
d) The market price is determined by the output produced by the firm with the larger market share.
e) The duopoly equilibrium lies between the pure-monopoly and purely competitive outcomes.
In the Cournot model of quantity competition, as the number of firms increases:
a) the total industry output declines asymptotically.
b) the difference between price and marginal cost increases.
c) price approaches average cost.
d) the equilibrium price steadily increases.
e) the price elasticity of demand for the product falls
