38. The existence of economies of scale is one reason oligopolies exist because

Question

38. The existence of economies of scale is one reason oligopolies exist because
A) 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.

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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