Multiple Choice Questions:
1. The kinked demand curve model illustrates
a. How price rigidity could characterize some oligopoly firms, despite changing marginal costs.
b. How price increases and price decreases can elicit different responses from rival firms, in oligopoly.
c. Why price rigidity may be more common when firms have excess capacity than when operating near capacity.
d. The importance of expectations about rival behavior in oligopoly.
e. All of the above.
2. The Herfindahl-Hirshman Index (HHI) increases as the number of firms __________ or the disparity of firm sizes ___________.
a. Increases; increases
b. Increases; decreases
c. Decreases; increases
d. Decreases; decreases
3. The Herfindahl-Hirshman Index (HHI) will increase the most in an industry when
a. One large firm merges with another large firm.
b. One large firm merges with a small firm.
c. Two small firms merge.
d. A large firm separates into two firms.
4. Which kind of merger increases the HHI and thus triggers concerns about competitiveness?
a. Horizontal mergers
b. Vertical mergers
c. Conglomerate mergers
d. All of the above
5. In game theory
a. There is not always a dominant strategy.
b. A Nash equilibrium is a dominant strategy.
c. Collusion is an example of a cooperative game.
d. all of the above are true.
6. In game theory
a. Cooperative strategies are more likely in repeated games than one-shot games.
b. Cooperative strategies are more likely in one-shot games than repeated games.
c. Cooperative strategies are equally likely in one-shot and repeated games.
d. We do not know whether cooperative strategies are more likely in one type of game or another.
7. In game theory
a. A dominant strategy in a noncooperative game does not yield the same result as if players cooperate.
b. A tit-for-tat strategy is a way to reward cooperation and punish noncooperation in a repeated game.
c. In a Nash equilibrium, neither firm has an incentive to change behavior.
d. All of the above are true.
8. Which of the following areas illustrates positive network externalities?
a. Telephones
b. Software
c. Fax machines
d. The Internet
e. All of the above