1) An oligopoly is a market structure in which there are

A) only a few buyers but many sellers.

B) only a few sellers selling either an identical or differentiated product.

C) many sellers selling a differentiated product.

D) a few products sold by many sellers.

2) Which of the following is a distinguishing characteristic of oligopoly?

A) A small number of firms compete.

B) No one firm's actions directly affect the actions of the other firms.

C) Firms are free to enter and exit the industry.

D) Natural barriers cannot prevent the entry of new firms.

3) The key feature of an oligopoly is that there

A) are many buyers and sellers.

B) is one seller.

C) exists product differentiation.

D) are only a few sellers.

4) The distinguishing features of oligopoly are ________ and a ________ in the industry.

A) barriers to entry; large number of firms

B) no barriers to entry; few firms

C) barriers to entry; few firms

D) no barriers to entry; large number of firms

5) Natural oligopoly is a situation where

A) the level of demand can support only a few firms.

B) there is only one firm.

C) there are only two firms.

D) there are legal barriers to entry.

6) A duopoly occurs when

A) there are only two producers of a particular good competing in the same market.

B) there are two producers of two goods competing in an oligopoly market.

C) there are numerous producers of two goods competing in a competitive market.

D) the one producer of two goods sells the goods in a monopoly market.

7) An market in which the Herfindahl-Hirschman Index (HHI) is 2,500 is considered to be

A) an oligopoly.

B) monopolistically competitive.

C) a monopoly.

D) perfectly competitive.

8) ________ is a group of firms that have colluded to limit their output and raise their price.

A) A cartel

B) An oligopoly

C) A strategy

D) A duopoly

9) Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

A) The choices made by one firm have a significant effect on other firms.

B) Each firm faces a downward-sloping demand curve.

C) Firms are profit-maximizers.

D) There is more than one firm in the industry.

10) Game theory is most useful for analyzing

A) perfect competition.

B) monopolistic competition.

C) oligopoly.

D) monopoly.

11) Game theory is applicable to oligopoly behavior because oligopolists

A) use strategic behavior.

B) ignore rival firms.

C) are price takers.

D) can only be profitable if they collude.

12) Game theory is distinctive in that its elements are

A) costs, prices, and profits.

B) revenues, elasticity, and profits.

C) rules, strategies, payoffs, and outcomes.

D) patents, copyrights, and barriers to entry.

13) The simplest prisoners' dilemma is a game that, in part, requires

A) two players who are able to communicate with each other.

B) two players who are unable to communicate with each other.

C) monopolistic competition.

D) an oligopoly with one very large firm.

14) In the prisoners' dilemma game, when each player takes the best possible action given the action of the other player

A) a competitive equilibrium is reached.

B) one player denies and one player confesses.

C) both players deny.

D) a Nash equilibrium is reached.

15) In an oligopoly price-fixing game, each player tries to

A) minimize the market shares of its opponents.

B) maximize its own market share.

C) minimize the profits of its opponents.

D) maximize its own profit.

16) In what type of market is a cartel possible?

A) a market in which there are only a few firms and barriers to entry exist

B) a market in which firms sell a homogeneous good

C) a market in which firms sell a differentiated good

D) a market in which there are many firms

17) Which of the following is TRUE regarding a collusive agreement?

I.It is illegal in the United States.

II.Two or more producers agree to restrict output or raise prices.

III.Firms' profits are never maximized under this sort of agreement.

A) I and II

B) I and III

C) II and III

D) I, II and III

18) If two duopolists can collude successfully, then both will

A) earn greater profits than if they did not collude.

B) price at marginal cost.

C) price below average total cost.

D) lower their economic profits.

19) Cartels are typically subject to cheating by their members because

A) if the other firms stick to the agreement, a firm can increase its profits by cutting its price.

B) barriers to entry do not exist so new entrants will join.

C) the U.S. Justice Department will punish any cartel agreement before the cartel has had a chance to operate.

D) product differentiation allows the firms in the cartel to cheat.