Question: The central characteristic of oligopolistic industries is:

interdependent pricing decisions.

flexible prices.

price competition.

few or no economies of scale.

Answer: interdependent pricing decisions.

Question: Oligopoly is characterized by:

no barriers to entry.

low market concentration.

inability to set price.

few sellers.

Answer: few sellers.

Question: A cartel is:

legal in the United States as long as collusion is explicit.

a group of firms that collude to maximize group profits.

found in monopolistically competitive industries.

a group of fringe firms.

Answer: a group of firms that collude to maximize group profits.

Question: To be successful in increasing prices for their product, members of a cartel:

do not talk to one another.

limit output.

encourage entry.

engage in predatory pricing.

Answer: limit output.

Question:

Answer: oligopolies act as if they were monopolists by assigning output quotas to each member so that joint profits are maximized.

Question: In the cartel model of oligopoly, the firms would decide how much to produce where:

marginal cost equals marginal revenue.

marginal cost equals price.

marginal cost equals average total cost.

the kink in the demand curve is.

Answer: marginal cost equals marginal revenue.

Question: Refer to the graph shown. The oligopolist shown currently charges a price P1. It believes that rival firms will:

gain market share if it lowers its price.

lose market share if it lowers price.

raise price if it raises price.

lower price if it lowers price.

Answer: lower price if it lowers price.

Question:

Answer: barriers to entry are much more important than market structure in determining the degree of price competition in an industry.

Question:

Answer: roughly equal to the cost of producing a box of facial tissue.

Question: In which of the following models of firm behavior do firms make strategic pricing decisions and also charge a perfectly competitive price?

Cartel model of oligopoly

Contestable market model of oligopoly

Perfectly competitive model

Monopoly model

Answer: Contestable market model of oligopoly