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Exam 11: Oligopoly

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Question 1

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Which of the following market structures is characterized by the absence of market power?

A) Monopolistic competition.
B) Oligopoly.
C) Monopoly.
D) Perfect competition.

E) B) and C)
F) All of the above

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Question 2

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If all of your friends use the same instant messaging service provider, you are likely to use it too.This behavior may create

A) Cartels.
B) Nonprice competition.
C) A network economy.
D) Distribution control.

E) B) and D)
F) B) and C)

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Question 3

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All of the following are arguments to have less antitrust enforcement except for

Market share is the percentage of total

If close substitutes are available that have only slight product differentiation, a firm can still be a monopoly.

Mergers and acquisitions can act as a barrier to entry.

A demand curve will be kinked if rivals match price reductions but not price increases.

Price leadership

Which of the following industries has the highest concentration ratio?

The Herfindahl-Hirshman Index is

A cartel is

The most common form of nonprice competition is

An industry's market structure refers to

The joint and individual interests of oligopolists are to maximize industry profit.

$\begin{array}{l}\begin{array} { l l r } \text { Pool Sweeper } &\text { Output } &\text { Market share } \\\text { Producer }&\text { (Revenue) }&\text { (percent) }\\\hline \text { North Star } & \$ 20,000 &\_\_\_\_\_\\\text { Hurricane } & \$ 16,000 &\_\_\_\_\_\\\text { Blue Lagoon } & \$ 2,000 &\_\_\_\_\_\\\text { Clean Sweep } & \$ 2,000&\_\_\_\_\_\\\end{array}\end{array}$ Table 25.2 Refer to Table 25.2.Assume there are only four firms in the pool sweeper industry.What is the market share for North Star?

If a firm in an oligopoly expands its market share at prevailing prices, its competitors

Suppose the larger firm of a duopoly has sales of $400 million and the smaller firm has sales of $100 million.The market share of the larger firm is

Since 1996, the U.S.Justice Department has shifted its focus from the concept of "unfair competition" to an emphasis on consumer welfare.

$\begin{array}{l}\begin{array} { | l | l | l | } \hline & { \text { Company XYZ's Possible Responses } } \\\hline \text { Company ABC's Action } & \text { Charge High Prices } & \text { Charge Low Prices } \\\hline \text { Charge high prices } & \text { Profit gain loss } = \$ 0 & \text { Profit loss } = \$ 5,000 \\\hline \text { Charge low prices } & \text { Profit gain } = \$ 50,000 & \text { Profit loss } = \$ 500 \\\hline\end{array}\\\text { Table } 25.1\end{array}$ Given the payoff matrix in Table 25.1, if the probability of rivals matching a price reduction is 99 percent, what is the expected payoff for a price cut by Company ABC?

The study of how decisions are made when strategic interaction between firms exists is known as