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Market power is the ability of a firm to
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Control the price and quantity supplied
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An industry's market structure refers to
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The number and size of the firms in the industry
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in which of the following market structures are entry barriers the highest?
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Monopoly
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There are many corn farmers, each of whom produces the same product. The corner market can best be classified as
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Perfect competition
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Which of the following market structures is characterized by the absence of market power?
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Perfect competition
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Which market structure is characterized by a few interdependent firms?
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Oligopoly
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The number of firms in an oligopoly must be
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Small enough so that one firm's decisions have a significant impact on the decisions of the other firms in the industry.
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Which of the following may NOT characterize an oligopoly?
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No market power
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It is easiest for new firms to enter a
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Perfectly competitive market
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The soft drink market is dominated by Coke, Pepsi, and very few other firms. The firms often start price wars. The market can best be classified as
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Oligopoly
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Which of the following is NOT a determinant of market power?
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Age of the industry.
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The correct ranking of degree of market power (from highest to lowest) is
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Monopoly, oligopoly, monopolistic competition, perfect competition.
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If an oligopoly market is contestable and new firms enter, the
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Market power of the former oligopolists will be reduced.
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A contestable market is
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An imperfectly competitive situation that is subject to entry.
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Which of the following is the critical determinant of market power?
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The size of each firm.
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The concentration ratio measures the
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Proportion of total output produced by the four largest producers in a specific market.
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The goal of a company in an oligopoly industry is to
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Increase market share and profits
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Concentration ratios tend to overstate the power of some corporations to influence economic outcomes because they measure output
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Only for domestic production when the true market boundaries are international for some markets.
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A nationwide concentration ratio is likely to understate market power when
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The true markets are local and small
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Which of the following industries is likely to have the highest concentration ratio?
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Video game systems.
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Which of the following industries has the highest concentration ratio?
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Satellite radio.
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The concentration ratio for an oligopoly is
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Over 60%
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Market share can be computed by dividing
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The amount sold by a single firm by the total sold in the market
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Suppose there are only three firms in a market. The largest firm has sales of $500 million, the second largest has sales of $300 million, and the smallest has sales of $200 million. The market share of the largest firm is
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50%
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When a business advertises that it's product has unique features that make it superior to other similar products, it is engaging in
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Product differentiation
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If oligopolists start cutting prices to capture a larger market share, the results will be
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Lower prices, increased output, and smaller profits.
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Which of the following is NOT a danger of experimenting with pricing for an oligopoly?
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Product differentiation
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RC Cola lost market share in the 1980s due to
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It's decision not to advertise
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If an oligopolist is going to change its price or output, it's initial concern is
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The response of its competitors.
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The study of how decisions are made when strategic interaction between firms exists is known as
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Game theory
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Oligopolists have a mutual interest in coordinating production decisions in order to maximize joint
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Profits
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The potential for maximizing total industry profits is greater in oligopolies than in perfect competition because
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There are fewer firms and each is dependent on the actions of rivals.
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In an effort to maximize profits, oligopolists could participate in all of the following but
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Self-destructive behavior
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The pricing strategy in which there is an explicit agreement among producers regarding price is called
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Price-fixing
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Borden, Inc., Which sold milk to Texas Tech University, public schools, and hospitals, paid $8 million in fines for
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Price-fixing
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General Electric and Westinghouse were convicted of
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Price-fixing
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Price leadership is a method by which oligopolies can
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Increase prices without explicit price-fixing
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Open an explicit agreements concerning pricing and output shares transform an oligopoly into a
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Cartel
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Sky-High skywriters temporarily reduces its price when a new firm called the sky's the limit skywriting enters the industry. skyhigh skywriters is practicing
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Predatory pricing
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When US government regulations that prevent goods from being imported are relaxed, this
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Reduces the barriers to entry into US markets
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The most common form of nonprice competition is
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Advertising.
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High training costs help firms maintain
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Barriers to entry
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Refer to the table 25.2. Assume there are only four firms in the pool sweeper industry. What is the market share for North star?
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50%
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Collusion is undesirable an illegal because
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Resources are misallocated and the level of output is restricted.
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When oligopoly firms collude to raise prices,
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Each firm benefits, but society loses.
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Often antitrust enforcers
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Lack the resources to prosecute anti-competitive behavior.
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Which of the following is NOT an argument to have less antitrust enforcement?
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Oligopolies can lead to less output and higher prices.
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And in the news article titled "Eliminating competition" indicates that, in order to protect their prices and profits, the major carriers operating at the Washington, DC, Dulles airport
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Practiced predatory pricing.
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According to an In the news article titled "Major Airlines match Southwest's Fare cuts,"
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Airlines often match their rivals' fares rather than risk losing price-sensitive passengers.
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In the article "AT&T plan to buy T-Mobile means higher prices, and fewer phones," the opportunity cost of the merger between AT&T and T-Mobile is
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Reduced phone selection
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