1. According to the text, rivalry among firms is a feature of which of these two market structures?

• a. Both oligopoly and perfect competition
• b. Neither oligopoly nor perfect competition
• c. Only oligopoly
• d. Only perfect competition

2. An oligopoly market structure tends to be more highly contestable than a perfectly competitive market because the possibility of making sustainable, long-run economic profits encourages competitors to enter.

• a. True
• b. False

3. To measure the degree of market concentration in an industry, a concentration ratio can be applied only if _____.

• a. two or at most three firms compete in the industry being studied
• b. the researcher first selects the number of the largest firms as a basis for comparison
• c. each of the three largest firms has an equal share of industry sales
• d. at least 10 firms offer product for sale in the industry

4. The four-firm concentration ratio for an oligopolistic industry is generally larger than the eight-firm concentration ratio.

• a. True
• b. False

5. What is an important shortcoming of a four-firm concentration ratio as a measure of industry concentration?

• a. It completely ignores the sales of firms not among the top four firms.
• b. It fails to account for total industry sales in each reporting time period during the study.
• c. It cannot distinguish between an industry with a single dominant firm and an industry with four powerful firms.
• d. The text says, instead, that the ratio has no discernible shortcomings.

6. Assume that seven firms sell product in an industry. The seven sales values for the year are: $20, $15, $12, $10, $5, $2, $1. The two-firm concentration ratio is closest to _____.

• a. 81%
• b. 72%
• c. 63%
• d. 54%