Chapter 15: Oligopoly and Antitrust Policy

Cartel

A __________ is a combination of firms that acts as if it were a single firm; a shared monopoly.

Concentration Ratio

A __________ is the value of sales by the top firms of an industry stated as a percentage of total sales.

A. value of sales by the top firms of an industry stated as a percentage of total industry sales.

A concentration ratio is the: A. value of sales by the top firms of an industry stated as a percentage of total industry sales. B. units sold of the top number of firms in an industry. C. number of firms that control over 50% of the market.

Oligopoly

A market structure in which there are only a few firms and firms explicitly take other firms' likely response into account.

Cartel Model of Oligopoly

A model that assumes that oligopolies act as if they were monopolists that have assigned output quotas to individual member firms of the oligopoly so that total output is consistent with joint profit maximization.

Both C. and D.

A three-digit industry in the NAICS system is more broadly defined compared to a: A. two-digit industry. B. one-digit industry. C. four-digit industry. D. five-digit industry.

D. the competitive process.

An antitrust policy is the government's policy toward: A. consumers' belief in the market. B. import restrictions. C. price controls. D. the competitive process.

Herfindahl Index

An index of market concentration calculated by adding the squared value of the individual market shares of all the firms in the industry.

D. structure.

If the courts found a company in violation of antitrust laws based on high market share, it is using judgment by: A. performance. B. design. C. government. D. structure.

Both A. and B.

In a perfectly competitive market, there are __________. A. few firms B. no output restrictions C. interdependent firms D. no long run economic profit prossible

Strategic Decision Making

In an oligopoly, there are fewer firms, and each firm is more likely to explicitly engage in __________--taking explicit account of a rival's expected response to a decision you are making.

Both C. and D.

Key features of an oligopoly are: A. Firms set prices independently of market conditions. B. Firms take the market price as given. C. There are a small number of firms. D. Firms take other firms' actions into account.

Implicit Collusion

Occurs when multiple firms make the same pricing decisions even though they have not explicitly consulted with one another.

C. firm performance.

The Sherman Antitrust Act is consistent with judgment by: A. labor practices. B. market structure. C. firm performance. D. firm structure.

Contestable Market Model

The _________ is a model of oligopoly in which barriers to entry and barriers to exit, not the structure of the market, determine a firm's price and output decisions.

North American Industry Classification System (NAICS)

The __________ is an industry classification that categorizes industries by type of economic activity and groups firms with like production processes.

C. performance.

The basis of judgment for the Standard Oil case was: A. market concentration. B. cost. C. performance. D. structure.

Both A. and C.

The higher the concentration ratio, the closer the industry is to: A. an oligopoly. B. perfect competition. C. monopolistic competition.

A. the number of firms in the market.

The lawsuit against the Aluminum Company of America focused on: A. the number of firms in the market. B. unfair business practices. C, the behavior of competitors.

C. competitive price.

The lowest price that an oligopoly firm will generally charge is the: A. monopoly price. B. the value Cannot be determined. C. competitive price.

B. each action of a firm must be analyzed separately and with a particular context.

The most important reason the judgment by performance criterion is difficult to implement in practice is that: A. the court must decide whether to use concentration ratios or the Herfindahl index. B. each action of a firm must be analyzed separately and with a particular context. C. it is difficult to determine the relevant industry. D. it is difficult to determine the relevant competitors.

True

True or false: A cartel is a combination of firms that acts as if it were a single firm.

True

True or false: Oligopolists' pricing and output strategies can take many forms and are difficult to characterize with one model.

B. strategic decision.

When a firm takes explicit account of a rival's expected response to a decision it is making a(n): A. intuitive decision. B. strategic decision. C. monopolist's decision. D. perfect competitor's decision.

B. Cartel model

Which of the following is one of the economist's models of oligopoly behavior? A. Perfect model B. Cartel model C. Conspiracy model D. Monopoly model

Judgment by Performance

__________ is one of two competing views on U.S. antitrust law which states that the competitiveness of markets should be judged by the performance (behavior) of firms in that market.

Judgment by Structure

__________ is one of two competing views on U.S. antitrust law which states that the competitiveness of markets should be judged by the structure of the industry.

Antitrust Policy

__________ is the government's policy toward the competitive process.