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oligopoly MCQs

Practise focused oligopoly questions with marked answers for exam preparation and subject revision.

oligopoly Mcqs
1. Collusion is difficult for an oligopoly to maintain ?
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A. because, in the case of oligopoly self-interest is in conflict with cooperation.

B. all of these answers

C. because antitrust laws (also known as competition laws) make collusion illegal

D. if additional firms enter of the oligopoly

2. A situation in which oligopolists interacting with one another each choose their best strategy given the strategies that all the other oligopolists have chosen is known as a ?
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A. collusion solution

B. cartel

C. Nash equilibrium

D. dominant strategy.

3. In Game Theory ?
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A. Firms collude as part of cartel

B. Firms are assumed to act independently

C. Firms consider the actions of others before deciding what to do

D. Firms are assumed to cooperate with each other

4. Many economics argue that resale price maintenance ?
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A. has a legitimate purpose of stopping discount retailers from free riding on the services provided by full services retailers?

B. is price fixing and, therefore is prohibited by law

C. enhances the market power of the producer

D. is price fixing and therefore, is prohibited by law and enhances the market power of the producer

5. When an oligopolist individually chooses its level of production to maximize its profits, it produces an output that is ?
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A. less than the level produced by a monopoly and more than the level produced by a competitive market

B. more than the level produced by either monopoly or a competitive market

C. less than the level produce by either monopoly or a competitive market

D. more than the level produced by a monopoly and less than the level produced by a competitive market
6. Suppose that ABC publishing sells an economics textbook and accompanying study guide. Raheel is willing to pay Rs75 for the text and Rs15 for the study guide. Mariam is willing to spend Rs60 for the text and Rs25 for the study guide. Suppose both the book and study guide have a zero marginal cost of study production. If ABC publishing engages in tying the two products its best strategy is to charge a combined price of ?
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A. Rs 75

B. Rs 60

C. Rs 85

D. Rs 90

7. In the kinked Demand Curve theory it is assumed that ?
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A. An increase in price by the firm is followed by others

B. A decrease in price by the firm is followed by others

C. Firms collude to fix the price

D. An increase in price by the firm is not followed by others
8. Suppose an oligopolist individually maximizes its profits. When calculating profits, if the output effect exceeds the price effect on the marginal unit of production, then the oligopolist ?
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A. is in a Nash equilibrium

B. Should produce more units

C. Should produce fewer units

D. has maximized profits.

E. should exit the industry.

9. In a cartel member firms may be given a fixed amount to produce. This is called a ?
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A. Limit

B. Factor

C. Quotient

D. Quota
10. In the Kinked demand curve theory ?
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A. non-price competition is likely

B. Demand is price inelastic

C. There is a kink in the marginal cost curve

D. Demand is price elastic

11. A model of Game theory of oligopoly is known as the ?
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A. Jury Box

B. Monopoly Cell

C. Prisoners Dilemma

D. Jailhouses Sentences

12. Suppose that ABC publishing sells an economics textbook and accompanying study guide. Raheel is willing to pay Rs75 for the text and Rs15 for the study guide. Mariam is willing to spend Rs60 for the text and Rs25 for the study guide. Suppose both the book and study guide have a zero-marginal cost of study production. If ABC publishing charges separate price for both products its best strategy is to charge price that when combined, total ?
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A. Rs 85

B. Rs 75

C. Rs 80

D. Rs 60

13. The Kinked Demand curve theory assumes ?
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A. Firms cooperate

B. Firms act as part of cartel

C. Firms are not profit maximisers

D. Firms are competitive
14. The market for hand tools (such as hammers and screwdrivers) is dominated by Draper Stanley, and Craftsman This market is best described as ?
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A. an oligopoly

B. monopolistically competitive

C. competitive

D. a monopoly

15. If oligopolists engage in collusion and successfully from a cartel, the market outcome is ?
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A. the same as if it were served by competitive firms.

B. efficient because cooperation improves efficiency

C. the same as if it were served by a monopoly.

D. known as a Nash equilibrium

16. When a oligopolist individually chooses its level of production to maximize its profits it charges a price that is ?
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A. less than the price charged by a monopoly and more than the price charged by a competitive market

B. more than the price charged by a monopoly and less then the price charged by a competitive market

C. more than the price charged by either monopoly or a competitive market

D. less than the price charged by either monopoly or a competitive market

17. A market structure in which many firms sell products that are similar but not identical is known as ?
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A. perfect competition

B. monopoly

C. oligopoly

D. monopolistic competition
18. In cartels ?
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A. Each individual firm profit maximizes

B. The industry as a whole is loss making

C. There is no need to police agreements

D. There may be an incentive to cheat
19. Laws that make it illegal for firms to conspire to raise prices or reduce production are known as ?
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A. pro-competition laws

B. antimonopoly laws

C. antitrust laws

D. all of these answers

E. anti-collusion laws

20. Firms in oligopoly are likely to ?
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A. Try to be a price maker

B. Invest heavily in branding

C. Act independently of other firms

D. Try to differentiate its products

21. In a cartel ?
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A. Price wars are common

B. Firms collude

C. Firms use price to win market share from competitors

D. Firms compete against each other

22. If a few firms dominate an industry the market is known as ?
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A. Duopoly

B. monopolistic competition

C. Oligopoly

D. Competitively monopolistic

23. As the number of sellers in an oligopoly increases ?
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A. output in the market tends to fall because each firm must cut back on production

B. The price in the market moves closer to marginal cost

C. collusion is more likely to occur because a larger number of firms can place pressure on any firm that defects

D. the price in the market moves further from marginal cost

24. As the number of sellers in an oligopoly grows larger, an oligopolistic market looks more like ?
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A. a collusion solution

B. monopoly

C. monopolistic competition

D. a competitive market