Econ 101 - Microeconomics » Winter 2022 » iVAT Chapter 15

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Question #1
If firms in an oligopolistic market jointly act as if they were monopolists to maximize profits then this behavior describes a:
A.   Contradictory model.
B.   Contestable market model.
C.   Cartel model.
D.   Competitive model.
E.   Monopolistically competitive model.
Question #2
The central characteristic of oligopolistic industries is:
A.   Flexible prices.
B.   Interdependent pricing decisions.
C.   Price competition.
D.   Few or no economies of scale.
Question #3
In the market for bank credit a large bank sometimes announces a change in interest rates. After the changes in interest rates are announced, other banks in the industry usually react by changing their rates in the same way. This is an example of:
A.   Monopolistic competition.
B.   A cartel.
C.   The kinked demand curve model.
D.   Implicit collusion.
Question #4
Suppose that Joline is the owner of one of the three meat sellers on a small island. Currently the price of a pound of ground beef is $3.99 and all three of the meat sellers are selling at that price. Question: Why might Joline not increase the price of ground beef to $4.99?
A.   She perceives that the other meat sellers will hold their prices at $3.99, and she will gain a large amount of market share.  Therefore, she perceives that she is facing an inelastic demand curve.
B.   She perceives that the other meat sellers will raise their prices to $5.99, and she will lose a large amount of market share. Therefore, she perceives that she is facing an inelastic demand curve.
C.   She perceives that the other meat sellers will hold their prices at $3.99, and she will lose a large amount of market share.  Therefore, she perceives that she is facing an elastic demand curve.
D.   None of the available answers.
Question #5
Suppose that Joline is the owner of one of the three meat sellers on a small island. Currently the price of a pound of ground beef is $3.99 and all three of the meat sellers are selling at that price. Question: Why might Joline not decrease the price of ground beef to $2.99?
A.   She perceives that the other meat sellers will reduce their prices as well, and she will not be able to gain a large amount of market share. Therefore, she perceives that she is facing an inelastic demand curve.
B.   She perceives that the other meat sellers will increase their prices, and she will not be able to gain a large amount of market share. Therefore, she perceives that she is facing an elastic demand curve.
C.   None of the available answers.
D.   She perceives that the other meat sellers will reduce their prices as well, and she will be able to increase total revenue.
Question #6
According to contestable market theory:
A.   Barriers to entry are much more important than market structure in determining the degree of price competition in an industry.
B.   Neither barriers to entry nor market structure affects the degree of price competition in an industry.
C.   Barriers to entry are much less important than market structure in determining the degree of price competition in an industry.
D.   Barriers to entry and market structure are both important in determining the degree of price competition in an industry.
Question #7
In general, the larger the geographic region:
A.   The higher costs will be.
B.   The more concentrated the industry will be.
C.   The less concentrated the industry will be.
D.   The higher prices will be.
Question #8
In general, if you narrowly define a market:
A.   The more concentrated the industry will be.
B.   The lower prices will be.
C.   The higher prices will be.
D.   The less concentrated the industry will be.
Question #9
Suppose that the cross-price elasticity of demand between a cable TV provider and a satellite TV company is 5.9. Given this information:
A.   We can conclude that the two companies are not in the same market.
B.   We can conclude that the market is too concentrated.
C.   We can conclude that the cable company's total revenue will increase if the price of satellite TV increased.
D.   We can conclude that the two companies are in the same market.
Question #10
Suppose that the cross-price elasticity of demand between a motorcycle company and a bicycle company is 0.1. Given this information:
A.   We can conclude that the market is not concentrated.
B.   We can conclude that the market is too concentrated.
C.   We can conclude that the two companies are in the same market.
D.   We can conclude that the two companies are not in the same market.
Question #11
If an industry has a four-firm concentration ratio of 72 it indicates that the:
A.   None of the available answers.
B.   Largest four firms in the industry produce 72 percent of the industry's output.
C.   Smallest four firms in the industry produce 72 percent output.
D.   Smallest four firms in the industry produce 28 percent of the industry's output.
E.   Largest four firms in the industry produce 28 percent of the industry's output.
Question #12
Which industry should have the highest concentration ratio:
A.   Corn production industry.
B.   The soda industry.
C.   Soap production industry.
D.   Olive oil industry.
E.   Fast food industry.
Question #13
One advantage of the Herfindahl index over the concentration ratio is that it:
A.   Tells about only the top 50 firms in an industry.
B.   Takes into account only the leading firms in an industry.
C.   Is easier to calculate.
D.   Gives extra weight to firms that are especially large.
Question #14
If an industry has exactly 20 firms with identical sales, the Herfindahl index must be:
A.   Greater than 100 but less than 200.
B.   Less than 100.
C.   Greater than 400.
D.   Greater than 200 but less than 400.

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