Oligopoly Review

Oligopoly is a market structure characterized by:

• independence in decision making

• regulated natural monopolies

• substantial diseconomies of scale

• a large number of small firms

• strategic behavior between rival firms

Oligopoly is a market structure that is characterized by a _____ number of ______ firms that produce _____ products.

• large; relatively small, independent; identical

• small; independent; identical or differentiated

• large; relatively small, independent; differentiated

• small; independent; differentiated

• small; interdependent; identical or differentiated

An extreme case of oligopoly in which firms collude to raise joint profits is known as a:

• duopoly

• cartel

• dominant producer

• price war

• price leadership

When firms openly agree on price, output, and other decisions aimed at achieving monopoly profits, those firms are practicing

• overt collusion

• tacit collusion

• price leadership

• price-taking behavior

• price discrimination

In which of the following market structures is it sometimes assumed that rival firms will match price decreases but not match price increases?

• Perfect competition

• Oligopoly

• Natural Monopoly

• Monopolistic Competition

• Monopoly

The cartel model of oligopoly predicts that

• all firms in the industry act in unison to set monopoly price

• each producer acts independently of others

• firms follow the low-price firm in the industry

• differences in cost of production discourage individual firms from cheating

• the markup on marginal cost should be the same for all firms

Collusion, price leadership, and price wars are usually observed in which of the following market structures?

• Perfect Competition

• Monopolistic Competition

• Oligopoly

• Monopoly

• Natural Monopoly