Oligopolies, Part 1
In an oligopoly,
A. Individual firms pay no attention to the behavior of other firms.
B. Advertising of one firm has no effect on all other firms.
C. One firm's pricing decision affects all the other firms.
C. One firm's pricing decision affects all the other firms.
The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called:
A. game theory
B. prisoner's dilemma
C. Nash equilibrium
A. game theory
A monopolist faces:
A. a perfectly elastic demand curve
B. a horizontal demand curve
C. a downward-sloping demand curve
C. a downward-sloping demand curve
Governments grant patents to encourage:
A. lower prices
B. research and development of new products
C. competition
B. research and development of new products
Price discrimination:
A. is the practicing of charging different prices to different customers based on the difference in supplying the product to different customers.
B. is the practice of giving preferential treatment to certain customers based on long-standing relationship to the producer.
C. is the practice of charging different prices to different customers when the price differences cannot be attributed to variations in cost.C. is the practice of charging different prices to different customers when the price differences cannot be attributed to variations in cost.
Bubba's Hula Shack bar and bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill. This is an example of:
A. two-part tariff pricing
B. arbitrage
C. price discrimination
C. price discrimination
Which of the following is NOT a characteristic of an oligopoly?
A. interdependent firms
B. low barriers to entry
C. a small number of firms
B. low barriers to entry
Refer to Game 1:
What is Alistair's dominant strategy?
A. Alistair should increase its advertising budget
B. Alistair should keep its advertising budget as is
C. Alistair has no dominant strategy in this game
A. Alistair should increase its advertising budget
How is a monopoly different from monopolistic competition?
A. There is no real difference between the two
B. A monopoly has significant barriers to entry but monopolistic competition has low barriers to entry
C. A monopoly can never make a loss but a firm in monopolistic competition can
B. A monopoly has significant barriers to entry but monopolistic competition has low barriers to entry
The first federal law passed to regulate monopolies in the United States was called:
A. The Sherman Act
B. The Clayton Act
C. The Federal Trade Commission Act
Arbitrage:
A. is the act of buying an item at a low price, bundling it with another and selling the new package at a much higher price.
B. is the act of buying an item at a low price and reselling the item at a higher price.
C. is the act of selling an item on consignment and collecting a huge portion of the proceeds to compensate for the seller's time.
B. is the act of buying an item at a low price and reselling the item at a higher price.
Why might a producer practice price discrimination?
A. to maximize profits
B. to maximize economic efficiency
C. to make its products more affordable to those with low incomes
A. to maximize profits
Which of the following is NOT a barrier to entry?
A. an inelastic demand curve
B. a patent
C. ownership of a key input
A. an inelastic demand curve
Does Baine have a dominant strategy?
A. No, there is no dominant strategy for Baine.
B. Yes, Baine should keep its advertising budget as is.
C. Yes, Baine should increase its advertising budget.
C. Yes, Baine should increase its advertising budget.
The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because:
A. Alcoa had a patent on the manufacture of aluminum.
B. Alcoa was designated as a public franchise until the year 1942.
C. Alcoa had control of almost all of the available supply of the mineral bauxite, which is needed in all aluminum manufacturing.
C. Alcoa had control of almost all of the available supply of the mineral bauxite, which is needed in all aluminum manufacturing.
The United States Congress has given two government entities the authority to police and authorize mergers. These are:
A. The Federal Trade Commission (FTC) and the Internal Revenue Service (IRS)
B. The Antitrust Division of the U. S. Dept. of Justice and the Federal Trade Commission (FTC)
C. The Antitrust Division of the U. S. Dept. of State and the Securities and Exchange Commission (SEC)
B. The Antitrust Division of the U. S. Dept. of Justice and the Federal Trade Commission (FTC)
The Bay Area subway system, BART, offers senior citizens discounted fares for BART rides. This suggests that BART authorities believe that senior citizens have a ________ demand for subway rides.
A. more price elastic
B. less income elastic
C. less price elastic
A. more price elastic
Which of the following is a necessary condition for successful price discrimination?
A. The seller must possess market power.
B. Buyers must have identical inelastic demands.
C. The buyer must possess market power.
A. The seller must possess market power.
Which of the following is the best example of an oligopolistic industry?
A. the cattle (beef) market
B. public education
C. the pharmaceutical industry
C. the pharmaceutical industry
Which company exerts Porter's Five Forces bargaining power of a buyer?
A. Walmart
B. Barnes and Noble
C. Alcoa
A. Walmart
What is a network externality?
A. It refers to a situation in which a product's usefulness increases with the number of people using it.
B. It refers to having a network of suppliers and buyers of a good or service.
C. It refers to a product that requires connection to a network for it to be useful.
A. It refers to a situation in which a product's usefulness increases with the number of people using it.
A merger between American Airlines and Delta Airlines would be an example of a:
A. conglomerate merger.
B. vertical merger.
C. horizontal merger.
C. horizontal merger.
Which of the following is necessary in order for a firm to successfully practice price discrimination?
A. The firm must be able to segment the market for the product.
B. The firm must practice product differentiation.
C. The demand for the firm's product is inelastic.
A. The firm must be able to segment the market for the product.
Which of the following firms is NOT able to practice price discrimination?
A. commercial airlines
B. the largest wheat farmer in Nebraska
C. movie theaters
B. the largest wheat farmer in Nebraska
A. restaurant chains
B. aircraft manufacturers
C. the broadcasting industry
A. restaurant chains
When word processing on personal computers expanded, the sales of typewriters began to disappear. Which of Porter's Five Forces does this event exemplify?
A. Bargaining power of buyers
B. Threat of competition from new entrants
C. Competition from a substitute good
C. Competition from a substitute good
A government designation that a private firm be the only legal producer of a good or service is called a:
A. patent organization
B. government-owned operation
C. public franchise
C. public franchise
A merger between U. S. Steel and General Motors would be an example of a:
A. conglomerate merger.
B. vertical merger.
C. horizontal merger.
B. vertical merger.
Perfect price discrimination is also known as:
A. first-degree price discrimination
B. monopoly
C. yield management
C. yield management
The law of one price holds exactly only if:
A. transactions costs are zero.
B. it is impossible for buyers to resell the good.
C. antitrust laws are being enforced.
A. transactions costs are zero.