Graded Homework - Chapter 14

To be called an oligopoly, an industry must have: relatively easy entry and exit. independence in decision making. a small number of interdependent firms. a horizontal demand curve.

a small number of interdependent firms.

If there are two gas stations in a very small town, then the gas station business there is probably best characterized as: perfectly competitive. monopolistically competitive. monopolistic. oligopolistic.

oligopolistic

(Problem 9b). Over the last 40 years, the Organization of Petroleum Exporting Countries (OPEC) has had varied success in forming and maintaining its cartel agreements. In the following question, choose the answer that best describes how the following factor may contribute to the difficulty of forming and/or maintaining its price and output agreements. Crude oil is a product that is differentiated by sulfur content: it costs less to refine low-sulfur crude oil into gasoline. Different OPEC countries possess oil reserves of different sulfur content. A. The product will now be more differentiated and that will make the cartel agreement harder to maintain. B. This will lead to less competition and make the cartel agreement harder to maintain. C. This will lead to a fall in market price and make the cartel agreement harder to maintain.

A. The product will now be more differentiated and that will make the cartel agreement harder to maintain.

(Problem 9a). Over the last 40 years, the Organization of Petroleum Exporting Countries (OPEC) has had varied success in forming and maintaining its cartel agreements. In the following question, choose the answer that best describes how the following factor may contribute to the difficulty of forming and/or maintaining its price and output agreements. New oil fields are discovered and increased drilling is undertaken in the Gulf of Mexico and the North Sea by nonmembers of OPEC. A. The product will now be more differentiated and that will make the cartel agreement harder to maintain. B. This will lead to less competition and make the cartel agreement harder to maintain. C. This will lead to a fall in market price and make the cartel agreement harder to maintain.

C. This will lead to a fall in market price and make the cartel agreement harder to maintain.

In which of the following situations does overt collusion take place? Competition among a large number of small firms generates similar but slightly different prices. Smaller firms in an industry have an unspoken agreement to charge the same price as the largest firm. Competition among a large number of small firms generates a stable market price. Firms in an industry agree openly on price and output, and they jointly make other decisions aimed at achieving monopoly profits.

Firms in an industry agree openly on price and output, and they jointly make other decisions aimed at achieving monopoly profits.

_____ occurs if Coke hires Michael Jordan to make a commercial and Pepsi follows by hiring Peyton Manning for its commercial. Antitrust policy Nonprice competition Price leadership Tacit collusion

Nonprice competition