1. Which of the following scenarios best describes an oligopolistic industry?
a. A single cable company that serves customers in a small town.
b. Thousands of soybean farmers sell their input in a global commodities
market.
c. Ann Arbor has one bookstore that sells textbooks to the 42,000
University of Michigan students.
d. Coca-Cola and Pepsi have a combined market share of 75% of the
global soft drink market.
e. Hundreds of firms produce similar, but differentiated, types of shoes.
2. Oligopoly is a market structure that is characterized by a _________ number
of________ firms that produce__________ products.
a. Large; relatively small, independent; identical
b. Small; independent; identical or differentiated
c. Large; relatively small, independent; differentiated
d. Small; independent; differentiated
e. Small; interdependent; identical or differentiated
3. If the only two firms in an industry agree to fix price at a given level, this is an
example of:
a. Collusion
b. Satisfying demand
c. Price extortion
d. Price discrimination
e. Price leadership
4. An extreme case of oligopoly in which firms collude to raise joint profits is
known as:
a. Duopoly
b. Cartel
c. Dominant producer
d. Price war
e. Price leadership
Use the following table for questions 5-6
Camden Cove
Low
High
Ainsley
High
$1000, $1000 $200, $1500
Manor
Low
$1500, $200
$800, $800
Above is the pay off matrix for Ainsley Manor and Camden Cove, the only two
hotels in Vacaytown. Ainsley Manor is the first entry in each box and Camden
Cove is the second entry in each box. Each week, each firm decides whether to
price high or low for the following week. The figure shows the profit per week
earned by the two firms.
5. What is the dominant strategy for Ainsley Manor?
a.
b.
c.
d.
e.
Price low.
Price high.
Do whatever Camden Cove does.
Do the opposite of whatever Camden Cove does.
There is no dominant strategy for Ainsley Manor.
6. What is the Nash equilibrium for Ainsley Manor and Camden Cove?
a. Ainsley Manor Prices high, Camden Cove prices high
b. Ainsley Manor Prices high, Camden Cove prices low
c. Ainsley Manor Prices low, Camden Cove prices high
d. Ainsley Manor Prices low, Camden Cove prices low
e. There is no Nash equilibrium for this game.
7. A dominant strategy equilibrium exists in a game when:
a. Every player has no choice.
b. Every player makes the same choice, regardless of the actions of the
other players.
c. Each player makes the best choice, dependent upon the choice of the
other players.
d. No player is able to dictate the actions of any other player.
e. Each player randomly selects choices each turn of the game.
8. Firms in a particular industry that informally learn to charge the same price
as the largest firm in that industry are an example of:
a. Nash equilibrium
b. Non cooperative Nash equilibrium
c. Price extortion
d. Overt collusion
e. Price leadership (tacit collusion)