Oligopoly IB Economics

1. To explain the strategic behaviour of firms, economists often use

Complex econometric models

Theory of knowledge

Statistical databases

Game theory

2. In non collusive oligopoly, firms must adopt _______________ behaviour, in order to take into account all possible actions of rivals.

Regulatory

Unconvential

Strategic

Pricing

3. Oligopoly industries can produce virtually identical products and highly __________________ products

Differentiated

Valuable

Desirable

Concentrated

4. Formal collusion takes place when firms openly agree on a price they will all charge. This type of collusion is called a

Cartel

Syndicate

Tacit collusion

Predatory pricing

5. American Economist Paul Sweezy attempted to explain the situation with non-collusive oligopoly by developing the:

Horizontal demand curve

Vertical demand curve

Kinked demand curve

S style demand curve

6. When firms in an oligopoly as a monopolist, they will produce at the point where:

MC = AC

MC = AR

MC = MR

MC = ATC

7. When oligopolies collude to maximize industry profits they act like a _________________

Duopoly

Monopoly

Imperfect market

Company in monopolistic competition.

8. With the oligopoly market structure there can be many firm in the industry, but the top 4 firms may have a ________________ ratio of 90%.

Demand

Concentration

Supply

Market

9. With non-collusive oligopoly firms are afraid to raise their prices above the current market price, because other firms:

Will not follow and they will lose sales

Might follow and this might lead to less demand

Will follow and this may anger existing consumers

Will not follow and industry profits will decline.

10. What is a key feature that is common to all oligopolies?

3 to 4 firms dominate the industry

Interdependence

There are always a small number of firms in the industry

There is price discrimination

11. In the US, authorities which investigate price fixing and other anti-competitive behaviour are often called:

Anti-trust regulators

Competition regulators

Price penetration regulators

All of the other answers are partly correct.

12. Interdependence makes firms want to _______________ and so avoid suprises and unexpected outcomes.

Cooperate

Maintain steady prices

Expand

Collude

13. With a kinked demand curve, there is an assumption that the firm only knows _______ point on its demand curve..

One

Every

Two

Three

14. Oligopoly is charaterized by very large advertising and marketing expenditures in order to develp brand loyalty and make demand for products:

Less elastic

More elastic

More consistent.

Less inelastic.

15. When firms in oligopoly charge the same price without formal collusion, this is an example of:

Informal collusion

Tacit collusion

Accidential collusion

Non-intential collusion

16. Which of the following is an example of non-price competition?

Packaging

Advertising and sales promotion

Sponsorship deals

All the other answers are examples.

17. Because prices change less than in competitive markets, oliogpolies tend to be characterised by:

Price flexibility

Price fixing

Price rigidity

Price skimming

18. With non-collusive oligopoly firms are afraid to lower their prices below the current market price, because other firms will follow and this will:

Create a price war and harm all other firms involved.

Make consumers believe the product is inferior or outdated

Create a price war and force firms to become more efficient.

Lead to highly competitive markets and losses for all firms.

19. Sometimes monopolies will compete vigorously against each other in order to gain _

Higher profits

Customer satisfaction

Market share

Normal profits

20. OPEC is an example of formal collusion between ______________

Governments

Oil companies

Oil bosses

Oil leaders