A Quiz On Oligopoly In Microeconomics For Intellectuals.

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A Quiz On Oligopoly In Microeconomics For Intellectuals.

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!


Questions and Answers
  • 1. 
    • 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 is 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. 
    • 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 individually 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. 
    • 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

  • 26. 
    Collusion is difficult for an oligopoly to maintain
    • A. 

      Because antitrust laws make collusion illegal

    • B. 

      Because, in the case of oligopoly, self-interest is in conflict with cooperation

    • C. 

      If additional firms enter of the oligopoly

    • D. 

      For all the above reasons

  • 27. 
    Laws that make it illegal for firms to conspire to raise prices or reduce production are known as
    • A. 

      Pro-competition laws

    • B. 

      Antitrust laws

    • C. 

      Antimonopoly laws

    • D. 

      Anticollusion laws

    • E. 

      All of the above