Module 33- Oligopoly in Practice

Airlines are prone to price wars because:

most fliers choose airlines on the basis of schedule and price.

Antitrust policy is designed to:

prevent firms from exercising monopoly power

Antitrust policy is the government attempt to:

prevent oligopolistic industries from becoming monopolies.

The purpose of antitrust policy is to:

prevent the exercise of monopoly power.

If the largest pizza restaurant in town adjusts its menu at the beginning of each year and its competitors take notice and follow suit, this would be a good example of:

price leadership

The model in which one firm sets a price and others in the industry also charge the same price is known as:

price leadership.

in the past, most of the cars sold in the United States were produced by the Big Three auto companies. General Motors would announce its prices for the new model year first, and then the other companies would match it. This practice was an example of:

price leadership.

A _____ occurs when tacit collusion breaks down and prices collapse.

price war

An attempt by a firm to convince buyers that its product is different from the products of other firms in the industry is:

product differentiation.

Which of the following make it easier for firms to tacitly collude?

similarities in interests

A trust is:

when shareholders of companies in an oligopolistic industry give over decision making to a board of trustees.

Product differentiation is most likely to occur when firms:

have tacit agreements not to engage in price wars

The government agency in the United States that reviews proposed mergers of firms in the same industry and prohibits mergers that it believes will reduce competition is the:

Department of Justice.

What makes it more difficult for oligopolistic firms to enforce tacit collusion?

Having large enterprises as buyers of the products supplied by the oligopoly

All of the following are true statements regarding price wars EXCEPT: -They occur when tacit collusion breaks down. -Aggressive price competition causes prices to collapse. -Sellers try to put each other out of business. -It is a form of cooperative behavior.

It is a form of cooperative behavior.

When firms engage in tacit collusion, they:

Limit production in a way that enhances industry profits.

______ is a situation in which one firm sets the price and other firms in the industry match that price.

Price leadership

The first law designed to curb monopoly power in the United States was the _____ Act.

Sherman Antitrust

Which statement would make it difficult for oligopolists to collude?

There are few buyers in the market.

The field of law that attempts to limit the ability of oligopolists to collude and restrict competition is called:

antitrust policy.

Which of the following is NOT a mechanism by which oligopolists can maintain tacit collusion and avoid price wars?

complex pricing schemes

The 1890 Sherman Antitrust Act makes it illegal for firms to

create monopoly power.