Chapter 11 Homework Oligopoly

The value of the four−firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

anything greater than 40 percent.

In an oligopoly market...

one​ firm's pricing decision affects all the other firms.

Oligopolies exist and do not attract new rivals because

of barriers to entry.

Patents, tariffs and quotas are all examples of

government-imposed barriers.

Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently.

True

If economies of scale are​ significant, the typical firm will not reach the minimum point on its long run average cost curve until it has produced a large fraction of industry sales.

True

A set of actions that a firm takes to achieve a​ goal, such as maximizing​ profits, is called

A business strategy

A market comprising of only two firms is called a

Duopoly

What was the primary reason why Ocean Spray at one time faced limited competition due to barriers to​ entry?

The primary reason that Ocean Spray faced limited competition was because

only Ocean Spray had access to most of the cranberries.

Oligopolies exist because of barriers to entry. One of the most important barriers to entry is due to economies of scale. Why is this​ true?

It is more likely for an industry to be an oligopoly than competitive in the presence of economies of scale because...

minimum average cost occurs when firm output is a large fraction of industry output.

One measure of the extent of competition in an industry is the concentration ratio. What level of concentration indicates that an industry is an​ oligopoly?

Most economists believe that a​ four-firm concentration ratio of

greater

than

40 percent indicates that an industry is an oligopoly.

Is the concentration ratio an accurate measure of the extent of​ competition?

The​ four-firm concentration ratio

is flawed in that it does not include sales in the U.S. by foreign firms.

What effect might the government have on​ oligopolies?

In​ oligopolies, the government might

impose barriers to entry with a quota to limit foreign competition.

The government indirectly influences the level of industry competition with its own barriers to entry. ​ How?

The government can restrict entry by

granting patents to firms with new inventions.

The Aluminum Company of America (Alcoa) has faced limited competition in the market for aluminum.

What barrier has kept new firms from entering the market for aluminum?

The Aluminum Company of America (Alcoa) has had almost exclusive ownership of bauxite, which is a key input.

Which of the terms below is defined as​ "anything that keeps new firms from entering an industry in which firms are earning economic​ profits"?

barriers to entry

Economies of scale exist when a​ firm's ___________ average costs fall as it​ __________ output.

long-run; increases

Which of the following terms is a barrier to​ entry?

a. ownership of a key input

b. patents

c. economies of scale

d. all of the above

d. all of the above

The cost of operating a Web site raises the average cost of a pizza much more for Mom and Pop pizza restaurants than for large chains like​ Dominos, Papa​ John's, or Pizza Hut.

The effect on a small pizza​ restaurant's costs of operating a Web site is an example of which barrier to​ entry?

economies of scale

What is the difference between explicit collusion and implicit​ collusion?

Unlike explicit​ collusion, implicit collusion

is where firms signal to each other without actually meeting and agreeing to charge the same price.

What is the difference between explicit collusion and implicit​ collusion?

Unlike explicit​ collusion, implicit collusion

where firms meet and agree to charge the same price​, and an example of implicit collusion is price leadership.