38. The existence of economies of scale is one reason oligopolies exist because
ID: 1236998 • Letter: 3
Question
38. The existence of economies of scale is one reason oligopolies exist becauseA) of strategic dependence.
B) the marginal cost decreases as output increases.
C) as output increases average total cost decreases leading to large-scale firms.
D) a firm is able to increase price leading to increased profits.
39. A tit-for-tat strategy is one in which oligopolies
A) try to avoid the problems of the prisoners' dilemma, but actually make themselves worse off.
B) keep cutting prices to punish rivals until the competitive price is reached.
C) cooperate almost all of the time, but occasionally do not cooperate in order to fool the antitrust authorities.
D) cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation.
40. Joe's hotdog stand merges with a company that supplies the condiments to Joe's. This is an example of
A) conglomerate merger.
B) vertical merger.
C) concentration ratio.
D) horizontal merger.
41. In which market structures is the firm able to earn long-run economic profits?
A) Oligopoly and monopoly.
B) Monopolistic competition and oligopoly.
C) Perfect competition and monopolistic competition.
D) Monopolistic competition, oligopoly and monopoly.
42. All of the following are true regarding oligopoly EXCEPT
A) there is no competition.
B) there are few sellers.
C) there is some ability to set price.
D) entry and exit is partially restricted.
44. Straight Cut beauty salon merges with Clean-Cut beauty salon. This is an example of
A) vertical merger.
B) horizontal merger.
C) conglomerate merger.
D) concentration ratio.
46. Over the past several decades, U.S. firms have faced more competition from overseas firms. Does this have any impact on the market power of U.S. oligopoly firms?
A) No, because the United States government has effectively blocked all imports that might compete with domestic firms in oligopoly industries.
B) Yes, competition from overseas firms can substantially limit domestic firms' market power.
C) There is no way to know.
D) No, because domestic firms in oligopoly markets are always so dominant that overseas producers have little or no impact on those markets.
47. Which of the following does NOT help explain why oligopolies exist?
A) Barriers to entry
B) Economies of scale
C) Product homogeneity
D) Mergers
48. The joining of firms that are producing or selling a similar product is known as
A) a vertical merger.
B) economies to scale.
C) a conglomerate merger.
D) a horizontal merger.
49. The dominant strategy allows a firm to
A) obtain the highest benefit, regardless of its rivals' actions.
B) transform a negative-sum game into a positive-sum game.
C) escape from a Prisoners' Dilemma situation.
D) transform a zero-sum game into a positive-sum game.
50. Suppose an industry has total sales of $25 million per year. The two largest firms have sales of $6 million each, the third largest firm has sales of $2 million, and the fourth largest firm has sales of $1 million. The four-firm concentration ratio for this industry is
A) 25 percent.
B) 50 percent.
C) 60 percent.
D) 36 percent.
Explanation / Answer
38. The existence of economies of scale is one reason oligopolies exist because C) as output increases average total cost decreases leading to large-scale firms. 39. A tit-for-tat strategy is one in which oligopolies A) try to avoid the problems of the prisoners' dilemma, but actually make themselves worse off. 40. Joe's hotdog stand merges with a company that supplies the condiments to Joe's. This is an example of B) vertical merger. 41. In which market structures is the firm able to earn long-run economic profits? D) Monopolistic competition, oligopoly and monopoly. 42. All of the following are true regarding oligopoly EXCEPT D) entry and exit is partially restricted. 44. Straight Cut beauty salon merges with Clean-Cut beauty salon. This is an example of A) vertical merger.
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