5. Oligopoly

Which of the following is a key characteristic of an oligopoly?

A. Many small sellers

B. One seller

C. A few sellers

D. No sellers

C. A few sellers

An oligopolistic industry is generally dominated by:

A. A small number of large firms

B. A large number of very small firms

C. A single government-owned firm

D. Individual consumers

A. A small number of large firms

In an oligopoly, the products offered by different firms are generally:

A. Completely unrelated

B. Close substitutes

C. Always identical

D. Impossible to substitute

B. Close substitutes

Which statement best describes firms in an oligopoly?

A. Firms are completely independent of one another

B. Firms have no influence on market conditions

C. Firms' decisions can affect other firms

D. Firms cannot change their prices

C. Firms' decisions can affect other firms

The barriers to entry and exit in an oligopoly are generally:

A. Very low

B. Non-existent

C. Moderate

D. High

D. High

Oligopolistic firms typically have:

A. Substantial control over price

B. No control over price

C. No demand for their products

D. Perfectly elastic demand

A. Substantial control over price

Products in an oligopoly may be differentiated through:

A. Government regulation only

B. Advertising and other non-price strategies

C. Elimination of competition

D. Lower production only

B. Advertising and other non-price strategies

Which combination correctly describes oligopoly?

A. Few sellers, high barriers, substantial price control

B. Many sellers, low barriers, no price control

C. One seller, no substitutes, no competition

D. Many sellers, identical products, no barriers

A. Few sellers, high barriers, substantial price control

Why are firms in an oligopoly considered interdependent?

A. Each firm's decisions may affect the decisions of other firms

B. Firms are controlled by consumers

C. Firms cannot make independent decisions

D. Firms always produce identical quantities

A. Each firm's decisions may affect the decisions of other firms

Which of the following is NOT a characteristic of oligopoly?

A. Few sellers

B. High barriers to entry and exit

C. Substantial control over price

D. A large number of small sellers

D. A large number of small sellers

In an oligopoly, demand depends heavily on the degree of:

A. Product availability

B. Pricing interdependence

C. Government intervention

D. Consumer income

B. Pricing interdependence

Pricing interdependence means that:

A. Firms ignore competitors' pricing decisions

B. Firms' pricing decisions may affect and be affected by competitors

C. Firms cannot change prices

D. Only consumers determine prices

B. Firms' pricing decisions may affect and be affected by competitors

In the case of price collusion, the aggregate market demand curve is composed of:

A. Individual production participants' demand

B. Government demand schedules

C. Foreign demand only

D. Consumer income curves

A. Individual production participants' demand

Under non-collusion, each firm faces:

A. The aggregate market demand curve only

B. An individual demand curve

C. A perfectly vertical demand curve

D. No demand curve

B. An individual demand curve

Which statement correctly compares collusion and non-collusion?

A. Collusion involves individual demand only, while non-collusion involves aggregate demand only

B. Both involve exactly the same demand curve

C. Collusion involves aggregate market demand, while non-collusion involves individual firm demand

D. Neither involves a demand curve

C. Collusion involves aggregate market demand, while non-collusion involves individual firm demand

Which situation best represents non-collusion?

A. Firms formally agree on price and output

B. Each firm makes pricing decisions independently

C. Firms form a cartel

D. Firms jointly determine market output

B. Each firm makes pricing decisions independently

In a collusive oligopoly, firms primarily coordinate their:

A. Employee benefits

B. Quantity produced and price charged

C. Advertising designs only

D. Production locations only

B. Quantity produced and price charged

A duopoly is a market structure with:

A. One producer

B. Two producers

C. Three producers

D. Many producers

B. Two producers

A duopoly is best described as:

A. A monopoly with two consumers

B. An oligopoly with only two producers

C. Perfect competition with two buyers

D. Monopolistic competition with two products

B. An oligopoly with only two producers

Which statement about duopoly is TRUE?

A. It has exactly two producers

B. It has exactly one producer

C. It has no competition

D. It has infinitely many producers

A. It has exactly two producers

A market with only two major producers would be classified as:

A. Monopoly

B. Perfect competition

C. Duopoly

D. Monopolistic competition

C. Duopoly

Price collusion refers to:

A. Competition among firms through lower prices

B. An agreement among firms concerning quantity and price

C. A government-set price

D. A consumer boycott

B. An agreement among firms concerning quantity and price

In price collusion, firms agree on:

A. Wages and employment only

B. Quantity produced and price charged

C. Advertising expenses only

D. Product packaging only

B. Quantity produced and price charged

One major effect of successful price collusion is that:

A. Profit decreases

B. Profit increases

C. Barriers to entry disappear

D. Competition always increases

B. Profit increases

Price collusion can reduce the:

A. Uncertainty of cash flows

B. Number of consumers

C. Number of products

D. Production capacity of all firms

A. Uncertainty of cash flows

According to the mind map, price collusion provides opportunities to:

A. Eliminate all barriers to entry

B. Create barriers to entry

C. Reduce product differentiation

D. Increase external competition

B. Create barriers to entry

Which of the following is NOT listed as a benefit of price collusion?

A. Increased profit

B. Reduced uncertainty of cash flows

C. Opportunities to create barriers to entry

D. Elimination of all competition

D. Elimination of all competition

A group of oligopolistic firms agrees to restrict output and set a common price. This is an example of:

A. Price collusion

B. Perfect competition

C. Non-collusion

D. Monopolistic competition

A. Price collusion

A cartel is:

A. A group of consumers competing against firms

B. A collusive agreement made openly and formally

C. A government tax

D. A type of perfect competition

B. A collusive agreement made openly and formally

What distinguishes a cartel from informal cooperation?

A. A cartel is made openly and formally

B. A cartel involves consumers only

C. A cartel eliminates all firms

D. A cartel requires perfect competition

A. A cartel is made openly and formally

Which of the following best describes a cartel?

A. An informal consumer agreement

B. An open and formal collusive agreement among firms

C. A government-owned monopoly

D. A market with no barriers

B. An open and formal collusive agreement among firms

A cartel is most closely associated with:

A. Collusion

B. Perfect competition

C. Consumer sovereignty

D. Free entry

A. Collusion

Which statement is correct?

A. Every oligopoly must be a cartel

B. A cartel is a form of collusive agreement

C. A cartel has only one producer

D. A cartel is the same as perfect competition

B. A cartel is a form of collusive agreement

Which market structure is more conducive to successful collusion?

A. An industry with a very large number of firms

B. An industry with a small number of firms

C. An industry with millions of sellers

D. An industry with no firms

B. An industry with a small number of firms

Successful collusion is easier when products produced by firms are:

A. Completely unrelated

B. Identical or the same

C. Impossible to compare

D. Always highly differentiated

B. Identical or the same

Similar cost structures among firms can:

A. Make collusion more successful

B. Prevent all cooperation

C. Eliminate demand

D. Reduce the number of consumers

A. Make collusion more successful

According to the mind map, successful collusion is more likely when orders received by firms are:

A. Large and rare

B. Small and frequent

C. Large and unpredictable

D. Non-existent

B. Small and frequent

A severe threat of retaliation by other firms in the market can:

A. Support successful collusion

B. Eliminate all barriers

C. Create perfect competition

D. Make products identical automatically

A. Support successful collusion

The degree of external competition is one of the:

A. Factors necessary for successful collusion

B. Characteristics of perfect competition only

C. Causes of monopoly

D. Types of product differentiation

A. Factors necessary for successful collusion

Which of the following is NOT a factor necessary for successful collusion according to the mind map?

A. Small number of firms

B. Identical products

C. Similar cost structures

D. Extremely large and infrequent orders

D. Extremely large and infrequent orders

Which combination is most favorable for successful collusion?

A. Many firms, different products, different costs

B. Few firms, identical products, similar cost structures

C. Many firms, identical products, high external competition

D. Few firms, unrelated products, no interaction

B. Few firms, identical products, similar cost structures

Why does a small number of firms facilitate collusion?

A. Coordination is generally easier among fewer firms

B. More firms always increase cooperation

C. Small numbers eliminate all demand

D. Consumers cannot buy products

A. Coordination is generally easier among fewer firms

Why can identical products facilitate collusion?

A. Firms have no common basis for competition

B. Firms can more easily coordinate on a common product and price

C. Products become unrelated

D. Entry barriers automatically disappear

B. Firms can more easily coordinate on a common product and price

Similar cost structures are useful for collusion because:

A. Firms have more similar economic incentives

B. Firms cannot compete

C. Consumers disappear

D. Products become differentiated

A. Firms have more similar economic incentives

Which factor relates specifically to the frequency and size of orders?

A. Similar cost structures

B. Small and frequent orders

C. External competition

D. Product differentiation

B. Small and frequent orders

Which factor represents a threat from other firms within the market?

A. Advertising

B. Severe threat of retaliation

C. Low barriers to entry

D. Consumer income

B. Severe threat of retaliation

An industry has five large firms selling very similar products and facing high entry barriers. This market is most likely:

A. Perfect competition

B. Monopoly

C. Oligopoly

D. Monopolistic competition

C. Oligopoly

Two firms dominate an industry and agree on the quantity each will produce and the price each will charge. This is:

A. Duopoly without cooperation

B. Price collusion

C. Perfect competition

D. Non-collusion

B. Price collusion

If firms in an oligopoly do not collude, each firm faces:

A. An individual demand curve

B. The aggregate market demand curve only

C. No demand curve

D. A perfectly horizontal supply curve

A. An individual demand curve

If firms in an oligopoly collude, the market demand analysis focuses on:

A. Aggregate market demand

B. Individual consumer income

C. Government expenditure

D. Individual employee demand

A. Aggregate market demand

Which situation would make successful collusion LESS likely?

A. Few firms

B. Identical products

C. Similar cost structures

D. Many competing firms

D. Many competing firms

Which situation would make successful collusion MORE likely?

A. Large number of firms

B. Identical products and similar cost structures

C. Very different products

D. No threat of retaliation

B. Identical products and similar cost structures

A firm in an oligopoly lowers its price because it expects competitors to respond. This illustrates:

A. Pricing interdependence

B. Perfect competition

C. Product elimination

D. Consumer independence

A. Pricing interdependence

Why do oligopolistic firms have substantial control over price?

A. There are only a few major sellers

B. There are millions of sellers

C. Products have no substitutes

D. The government always sets the price

A. There are only a few major sellers

Which strategy can oligopolistic firms use besides changing prices?

A. Non-price strategies such as advertising

B. Eliminating all consumers

C. Eliminating all competitors

D. Removing their products from the market

A. Non-price strategies such as advertising

Which statement best summarizes oligopoly?

A. Many firms sell identical products with free entry

B. A few firms dominate the industry and their decisions are interdependent

C. One firm controls the entire market

D. Consumers determine all prices

B. A few firms dominate the industry and their decisions are interdependent

Which of the following is the best example of product differentiation in an oligopoly according to the mind map?

A. Advertising

B. Government taxation

C. Elimination of substitutes

D. Removal of barriers

A. Advertising

Which statement about entry barriers in oligopoly is correct?

A. Entry and exit barriers are low

B. Entry and exit barriers are high

C. Entry is always completely free

D. Exit is impossible

B. Entry and exit barriers are high

If an oligopoly has a small number of firms, identical products, similar costs, and frequent small orders, these conditions generally:

A. Make collusion more difficult

B. Make successful collusion more likely

C. Create perfect competition

D. Eliminate price control

B. Make successful collusion more likely

Which of the following contains ONLY characteristics of oligopoly?

A. Few sellers, high barriers, substantial price control

B. Many sellers, free entry, no price control

C. One seller, no substitutes, no competition

D. Many sellers, identical products, low barriers

A. Few sellers, high barriers, substantial price control