Chapter 16 Test Answers – Flashcards
Flashcard maker : Tilly Wilkinson
T/F: the essence of an oligopolistic market is that there are only a few sellers.
true.
T/F: in a competitive market, strategic interactions among the firms are not important.
true.
a market consists of three firms of similar sizes, each selling a product that is similar but not identical. which type of market is this?
oligopoly.
characteristics of oligopolies
an oligopolistic market has only a few sellers.
the actions of any one seller can have a large impact on the profits of all other sellers.
oligopolistic firms are interdependent in a way that competitive firms are not.
the actions of any one seller can have a large impact on the profits of all other sellers.
oligopolistic firms are interdependent in a way that competitive firms are not.
in the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a…
strategic situation.
in general, game theory is the study of…
how people behave in strategic situations.
game theory is important for understanding which of the following market types?
oligopolistic but not perfectly competitive markets.
a distinguishing feature of an oligopolistic industry is the tension between…
cooperation & self-interest.
the simplest type of oligopoly is…
duopoly.
an agreement among firms in a market about quantities to produce or prices to charge is called…
collusion.
an agreement between two duopolists to function as a monopolist usually breaks down because…
each duopolist wants a larger share of the market in order to capture more profit.
as the number of firms in an oligopoly increases, the…
price approaches marginal cost, & the quantity approaches the socially efficient level.
as the number of firms in an oligopoly increases, the magnitude of the…
price effect decreases.
in markets characterized by oligopoly,…
the oligopolists earn the highest profit when they cooperate & behave like a monopolist.
as a group, oligopolists would always be better off if they would act collectively…
as a single monopolist.
a situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called…
a nash equilibrium.
which of these situations produces the largest profits for oligopolists?
the firms reach the monopoly outcome.
when firms have agreements among themselves on the quantity to produce & the price at which to sell output, we refer to their form of organization as a…
cartel.
the equilibrium quantity in markets characterized by oligopoly is…
higher than in monopoly markets & lower than in perfectly competitive markets.
the equilibrium price in a market characterized by oligopoly is…
lower than in monopoly markets & higher than in perfectly competitive markets.
a group of firms that’s act in unison to maximize collective profits is called a…
cartel.
once a cartel is formed, the market is in effect served by…
a monopoly.
an oligopolist will increase production if the output effect is…
greater than the price effect.
oligopolies can end up looking like competitive markets if the number of firms is…
large & they do not cooperate.
the theory of oligopoly provides another reason that free trade can benefit all countries because…
as the number of firms within a given market increases, the price of the good decreases.
game theory is necessary for understanding…
oligopoly, but it is not necessary for understanding monopoly or competition.
the prisoners’ dilemma provides insights into the…
difficult of maintaining cooperation.
the likely outcome of the standard prisoners’ dilemma game is that…
both prisoners confess.
in a game, a dominant strategy is…
the best strategy for a player to follow, regardless of the strategies followed by the other players.
in game theory, a Nash equilibrium is…
an outcome in which each player is doing his best given the strategies chosen by the other players.
an outcome in which no player wishes to change her chosen strategy given the strategies chosen by the other players.
the outcome that occurs when all players have a dominant strategy.
an outcome in which no player wishes to change her chosen strategy given the strategies chosen by the other players.
the outcome that occurs when all players have a dominant strategy.
