A Quiz On Oligopoly In Microeconomics For Intellectuals
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An oligopoly is a type of market in which the competition is often limited and there are a limited number of consumers and sellers. Over the past week, we have been able to cover much about this type of market and below is a quiz on oligopoly in microeconomics for intellectuals. Give it a try and get to review all that you have learned so far. All the best!
- 1.An oligopoly is a market structure in which many firms sell products that are similar but not identical
- A.
True
- B.
False
- 2.The market for crude oil is an example of an oligopolistic market
- A.
True
- B.
False
- 3.The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market
- A.
True
- B.
False
- 4.When firms cooperate with one another, it is generally good for society as a whole
- A.
True
- B.
False
- 5.When firms cooperate with one another, it is generally good for the cooperating firms
- A.
True
- B.
False
- 6.When oligopolists collude and form a cartel, the outcome in the market is similar to that generated by a perfectly competitive market
- A.
True
- B.
False
- 7.The price and quantity generated by a Nash equilibrium are closer to the competitive solution than the price and quantity generated by a cartel
- A.
True
- B.
False
- 8.The greater the number of firms in the oligopoly, the more the outcome of the market looks like that generated by a monopoly
- A.
True
- B.
False
- 9.Cooperation is easily maintained in an oligopoly because cooperation maximizes each individual firm's profits
- A.
True
- B.
False
- 10.The prisoners' dilemma demonstrates why it is difficult to maintain cooperation even when cooperation is mutually beneficial
- A.
True
- B.
False
- 11.There is a constant tension in an oligopoly between cooperation and self-interest because, after an agreement to reduce production is reached, it is profitable for each individual firm to cheat and produce more
- A.
True
- B.
False
- 12.The dominant strategy for an oligopolist is to cooperate with the group and maintain low production regardless of what the other oligopolists do
- A.
True
- B.
False
- 13.Antitrust laws require manufacturers to engage in resale price maintenance or fair trade
- A.
True
- B.
False
- 14.Predatory pricing occurs when a firm cuts prices with the intention of driving competitors out of the market so that the firm can become a monopolist and later raise prices
- A.
True
- B.
False
- 15.If a prisoners' dilemma game is repeated, the participants are more likely to independently maximize their profits and reach a Nash equilibrium
- A.
True
- B.
False
- 16.The market for hand tools (such as hammers and screwdrivers) is dominated by Black & Decker, Stanley, and Craftsman. This market is best described as
- A.
Competitive
- B.
A monopoly
- C.
An oligopoly
- D.
A duopoly
- 17.A market structure in which many firms sell products that are similar but not identical is known as
- A.
Perfect competition
- B.
Monopoly
- C.
Oligopoly
- D.
None of the above
- 18.If oligopolists engage in collusion and successfully form a cartel, the market outcome is
- A.
The same as if it were served by a monopoly
- B.
The same as if it were served by competitive firms
- C.
Efficient because cooperation improves efficiency
- D.
Known as Nash equilibrium
- 19.Suppose an oligopolist individual maximizes its profits. When calculating profits, if the output effect exceeds the price effect on the marginal unit of production, then the oligopolist
- A.
Has maximized profits
- B.
Should produce more units
- C.
Should produce fewer units
- D.
Should exit the industry
- E.
Is in a Nash equilibrium
- 20.As the number of sellers in an oligopoly grows larger, an oligopolistic market looks more like
- A.
A monopoly
- B.
A duopoly
- C.
A competitive market
- D.
A collusion solution
- 21.When an oligopolit individually chooses its level of production to maximize its profits, it produces an output that is
- A.
More than the level produced by a monopoly and less than the level produced by a competitive market
- B.
Less than the level produced by a monopoly and more than the level produced by a competitive market
- C.
More than the level produced by either a monopoly of a competitive market
- D.
Less than the level produced by either a monopoly or a competitive market
- 22.When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that is
- A.
More than the price charged by a monopoly and less than the price charged by a competitive market
- B.
Less than the price charged by a monopoly and more than the price charged by a competitive market
- C.
More than the price charged by either a monopoly or a competitive market
- D.
Less than the price charged by either a monopoly of a competitive market
- 23.As the number of sellers in an oligopoly increases
- A.
Collusion is more likely to occur because of larger number of firms can place pressure on any firm that defects
- B.
Output in the market tends to fall because each firm must cut back on production
- C.
The price in the market moves further from marginal cost
- D.
The price in the market moves closer to marginal cost
- 24.A situation in which oligopolists interacting with one another each choose their best strategy given the strategies that all the other oligopolists have chosen is known as a
- A.
Collusion solution
- B.
Cartel
- C.
Nash equilibrium
- D.
Dominant strategy
- 25.Many economists argue that resale price maintenance
- A.
Is price fixing and, therefore, is prohibited by law
- B.
Enhances the market power of the producer
- C.
Has a legitimate purpose of stopping discount retailers from free riding on the services provided by full-service retailers
- D.
Is both a and b
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