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True/False Quiz

  1. A duopoly is an oligopoly in which several firms duel for consumer demand.
      a. True
      b. False
  2. A differentiated oligopoly is a form of market organization where several different large firms produce a homogeneous commodity.
      a. True
      b. False
  3. Oligopoly is the prevalent form of market organization in the manufacturing sectors of industrial nations.
      a. True
      b. False
  4. A market may be organized as an oligopoly if there are many producers of a product, but transportation costs limit the number that compete directly on a local market.
      a. True
      b. False
  5. Oligopolistic markets are characterized by rivalries between firms that arise because the actions of each firm in an industry have an effect on the other firms in the industry.
      a. True
      b. False
  6. Limit pricing refers to the oligopolistic practice of charging a price so low that new firms are discouraged from entering the industry.
      a. True
      b. False
  7. The sources of oligopoly are generally the same as for monopoly, i.e., barriers to entry.
      a. True
      b. False
  8. Concentration ratios measure the total number of firms required to produce the total output of an industry.
      a. True
      b. False
  9. The Herfindahl index is equal to the sum of the market shares of all firms in an industry.
      a. True
      b. False
  10. If the concentration ratio for an industry is small, then the Herfindahl index is likely to be large.
      a. True
      b. False
  11. An oligopolistic industry is likely to have a large concentration ratio and a large Herfindahl index.
      a. True
      b. False
  12. The theory of contestable markets holds that an industry without barriers to entry or exit will operate as if it is perfectly competitive.
      a. True
      b. False
  13. The Cournot model is defined as a non-oligopolistic model.
      a. True
      b. False
  14. Firms described by the Cournot model assume that their rivals will keep their rates of production constant.
      a. True
      b. False
  15. Reference to the “Cournot” model is derived by merging “Course” and “not” into a single word and is a response to the question “Is this firm a monopolist?”
      a. True
      b. False
  16. The Cournot model focuses on interdependence among firms.
      a. True
      b. False
  17. An industry that can be described by the Cournot model will produce total output that is the same as that produced by a perfectly competitive industry, however they will charge a higher price.
      a. True
      b. False
  18. The kinked demand curve model describes a monopolistically competitive market.
      a. True
      b. False
  19. The kinked demand curve model provides an explanation of price rigidity in the face of changes in costs.
      a. True
      b. False
  20. The kinked demand curve model describes a demand curve that is very elastic for price cuts and less elastic for price increases.
      a. True
      b. False
  21. The marginal revenue curve associated with the kinked demand curve is vertical at the current market price.
      a. True
      b. False
  22. Oligopolists prefer to avoid engaging in nonprice competition.
      a. True
      b. False
  23. Collusion is illegal in the United States, but is legal in many other parts of the world.
      a. True
      b. False
  24. A cartel is an organization of colluding oligopolists.
      a. True
      b. False
  25. Cartels tend to self-destruct because each member has an incentive to cheat.
      a. True
      b. False
  26. Price leadership is an example of tacit collusion.
      a. True
      b. False
  27. The dominant-firm price leadership model describes a market structure in which a dominant firm is the price maker and all other firms are price takers.
      a. True
      b. False
  28. There is no general theory of oligopoly.
      a. True
      b. False
  29. The sector in which the size of the largest firms has grown most is banking.
      a. True
      b. False
  30. The sales maximization model assumes that firms will always continue to increase output until marginal revenue is equal to zero.
      a. True
      b. False
  31. If a firm with marginal cost equal to $2 faces a demand curve defined as QD = 100 - 5P, then revenue is at a maximum when price is $10.
      a. True
      b. False
  32. If a firm with marginal cost equal to $2 faces a demand curve defined as QD = 100 - 5P, then profit is at a maximum when price is $10.
      a. True
      b. False
  33. The movement towards globalization has been slowed by changes in the telecommunications and transportation industries.
      a. True
      b. False
  34. Firms in the entertainment and communications industry have grown and globalized by means of mergers.
      a. True
      b. False
  35. A firm’s architecture is defined by the buildings and furnishings that it owns.
      a. True
      b. False
  36. Successful firms concentrate on their core competencies and outsource all other activities.
      a. True
      b. False
  37. In order to compete successfully in global markets, firms should sacrifice agility for the economies of scale associated with large production facilities.
      a. True
      b. False
  38. The steel industry is comprised of virtual corporations.
      a. True
      b. False
  39. A virtual corporation is a temporary network of independent companies.
      a. True
      b. False
  40. Relationship enterprises are more limited and temporary than virtual corporations.
      a. True
      b. False
  41. Porter's strategic framework describes a structure based on five forces.
      a. True
      b. False
  42. Porter's strategic framework describes the strategies that firms should follow to maximize profits.
      a. True
      b. False
  43. According to Porter's strategic framework, profits will be lower in industries where suppliers have a high degree of bargaining power.
      a. True
      b. False
  44. If a firm produces a unique product and inspires a brand loyalty, it will tend to have higher profits.
      a. True
      b. False
  45. The creative company relies on six sigma to increase the efficiency of production.
      a. True
      b. False
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