Econ #8 study (exam 2) oligopoly

Which of the following describes collusion? Multiple choice question. a. A situation in which decision makers coordinate their actions to achieve a desired outcome. b. A market structure characterized by a single seller - producing a good or service for which there are no close substitutes. c. A group of competing companies that aim to maximize joint profits by coordinating their policies to fix prices - manipulate output - or restrict competition. d. A market structure characterized by a few large producers - of either standardized or differentiated products - operating in industries with extensive entry barriers.

a.

The process of identifying optimal strategies by starting at the end of a game tree and moving toward its origin is known as Multiple choice question. a. game solving. b tree analysis. c. backward induction. d. forward answering.

c.

The market share refers to: Multiple choice question. a. the percentage of sales by the four largest firms in a particular industry. b. the sum of the squared percentage of sales from all firms in a particular industry. c the percentage of total market sales accruing to one specific firm. d. the practice of charging different prices per unit for different quantities - or blocks - of a good or service.

c.

The output level for a monopolistically competitive firm is lower than the output level that achieves the minimum average total cost for the firm and, as such: Multiple choice question. a. must create barriers to entry. b. cannot earn a profit. c. is not productively efficient in the long run. d. is not allocatively efficient in the long run.

c.

The strategy of distinguishing one firm's product from the competing products of other firms is called product __________

differentiation

Indicate the two most common numerical indicators of market concentration. Multiple select question. a. The Herfindahl-Hirschman Index (HHI) b. The four-firm concentration ratio (CR4) c. A block-pricing index d. The market share

a,b

When a firm is producing at an output level where the MR = MC, it is following: Multiple choice question. a. the profit-maximization rule. b. secon-degree price discrimination. c. a cartel. d. first-degree price discrimination.

a.

Price leadership refers to Multiple choice question. a. firms agreeing to set the level of market output in order to set prices. b. the practice of the dominant firm signaling price changes. c. limited new entry into the market due to pricing practices of a cartel. d. the model where prices are determined a dominant buyer in the market.

b.

Producing output at the lowest possible total cost per unit of production is: Multiple choice question. a. marginal efficiency. b. productive efficiency. c. allocative efficiency. d. cost efficiency.

b.

A concentration index that measures the sum of the squared percentage of sales from all firms in a particular industry is called: Multiple choice question. a. a block-pricing index. b. the four-firm concentration ratio (CR4). c. the market share. d. the Herfindahl-Hirschman Index (HHI).

d.

A Nash ________ is an outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy.

equilibrum

The percentage of total market sales accruing to one specific firm is called the ______ share.

market

Profit _________ implies that monopolistically competitive firms should expand production up to the point where the marginal revenue equals the marginal cost.

maximization

Monopolistically competitive firms are unable to produce enough output to reach the ______________ average total cost because of the presence of other monopolistically competitive firms in the industry.

minimum

In a(n) __________ , there are a few large producers

oligopoly

In a(n) ___________ , producers are price makers and behave strategically when making decisions related to the features, prices, and advertising of their products.

oligopoly

A(n) _________ matrix is a table showing the potential outcomes arising from the choices made by decision makers.

payoff

The monopolistically competitive firm produces ________ output than would be productively efficient.

less

Backward induction is the process of Multiple choice question. a. identifying optimal strategies by starting at the end of a game tree and moving toward its origin. b. examining the pricing decision of other firms based on the dominant firm's action on pricing and output. c. determining whether firms will collude based on their past history of aggressive actions. d. solving a payoff matrix for the optimal strategies of two players.

a.

Monopolistically competitive firms are unable to produce enough output to reach the minimum average total cost because of the: Multiple choice question. a. presence of other monopolistically competitive firms in the industry. b. higher level of costs. c. product homogeneity. d. absence of other monopolistically competitive firms in the industry.

a.

A situation in which a game is played a number of times, sometimes infinitely, is known as a Multiple choice question. a. dominant game. b. repeated game. c. Nash game. d. theory game.

b.

A table showing the potential outcomes arising from the choices made by decision makers is: Multiple choice question. a. a dominant strategy. b. a payoff matrix. c. collusion. d. a Nash equilibrium.

b.

In game theory, a repeated game is played Multiple choice question. a. until the Nash equilibrium is achieved. b. many, sometimes an infinite number, times. c. until the dominant firm ends the game. d. with the winner determined by who wins the most games out of three.

b.

Used in noncollusive oligopolistic markets, the practice of a dominant firm to signal upcoming price changes to other firms in the industry is known as Multiple choice question. a. price taking. b. price leadership. c/ collusion. d. limit pricing.

b.

Which of the following is not a characteristic of monopolistic competition? Multiple choice question. a. Entry and exit is relatively easy. b. The products are standardized. c. Firms have some control over price. d. There is a relatively large number of buyers and sellers.

b.

A situation in which a particular strategy yields the highest payoff, regardless of the other player's strategy, is: Multiple choice question. a. a payoff matrix. b. a Nash equilibrium. c. a dominant strategy. d. collusion.

c.

Laws designed to prevent firms from engaging in behaviors that would lessen competition in a market are called: Multiple choice question. a. anti monopoly laws. b. Sherman laws. c. antitrust laws. d. Clayton laws.

c.

A group of competing companies that aim to maximize joint profits by coordinating their policies to fix prices, manipulate output, or restrict competition is called a(n): Multiple choice question. a. price discrimination. b. monopoly. c. oligopoly. d. cartel.

d.

In order for a monopolistically competitive firm to produce at a point that is both productively and allocatively efficient, which of the following has to be true about the profit-maximizing quantity? Multiple choice question. a. Demand = Average Total Cost b. Demand = Marginal Cost c. Marginal Cost = Average Total Cost d. Demand = Marginal Cost = ATC

d.

Because the products of monopolistically competitive firms are ____________ from other companies in their industry, the __________ curve they face is downward sloping.

different, demand

________ theory is the study of the strategic behavior of decision makers.

game

A market structure characterized by a relatively large number of sellers producing a differentiated product - for which they have some control over the price they charge - in a market with relatively easy market entry and exit is known as _______________

monopolistic

A person who invents the ability to time travel will likely operate as a(n) __________ because there would be no substitutes and entering that market would be difficult for anyone else. (Use only one word to fill in the blank.)

monopoly

A pure _________ is the only seller in a market

monopoly

The long-run equilibrium in a monopolistically competitive market results in firms realizing ________ profits, which removes all incentives for firms to enter or exit the industry.

normal

Monopolistically competitive firms are able to have some control over the __________ of their products.

price

Profit maximization implies that monopolistically competitive firms should expand production up to the point where the marginal revenue equals the marginal cost. (True or False)

true

__________ efficiency is producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost.

allocative

When the marginal benefit of the last unit equals the marginal cost of the last unit, production is ___________ efficient.

allocatively

Which of the following measures the percentage of sales by the four largest firms in a particular industry? Multiple choice question. a. The Herfindahl-Hirschman Index (HHI) b. The inflation rate c. The four-firm concentration ratio (CR4) d. The market share

c.

A market structure characterized by a relatively large number of sellers producing a differentiated product - for which they have some control over the price they charge - in a market with relatively easy market entry and exit is known as monopolistic ______________ . (Enter one word in the blank.)

competition

The kinked demand model occurs when: Multiple choice question. a, collusive oligopolistic firms ignore other firms' price increases, but match their price decreases. b. collusive oligopolistic firms ignore other firms' price decreases, but match their price increases. c. collusive oligopolistic firms ignore other firms' price decreases, but match their price increases. d noncollusive oligopolistic firms ignore other firms' price increases, but match their price decreases.

d.

What is the name of the model where firms operating in an oligopolistic market match only price decreases of other firms in the industry? Multiple choice question. a. circular flow model b. price elasticity of demand model d. kinked demand model e. law of demand model

d.

What is true about firms in monopolistic competition in the short-run? Multiple choice question. a. Monopolistically competitive firms generate a normal profit. b. Monopolistically competitive firms generate an economic profit. c. Monopolistically competitive firms generate economic losses. d. Monopolistically competitive firms can generate an economic profit, a normal profit, or an economic loss.

d.

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is called ____________ loss (one word).

deadweight

Producing output at the lowest possible total cost of production per unit is _____________ efficiency. (Enter one word in the blank.)

productive