Ch. 17 Microeconomics

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The essence of an oligopolistic market is that there are only a few sellers. t/f


In a competitive market, strategic interactions among the firms are not important. t/f


A market consists of three firms of similar sizes, each selling a product that is similar but not identical. Which type of market is this?

unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues

Which of the following statements about oligopolies is not correct?

strategic situation

In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a

how people behave in strategic situations

In general, game theory is the study of

oligopolistic but not perfectly competitive markets

Game theory is important for understanding which of the following market types?

cooperation and self interest

A distinguishing feature of an oligopolistic industry is the tension between


The simplest type of oligopoly is


An agreement among firms in a market about quantities to produce or prices to charge is called

each duopolist wants a larger share of the market in order to capture more profit

An agreement between two duopolists to function as a monopolist usually breaks down because

price approaches marginal cost, and the quantity approaches the socially efficient level

As the number of firms in an oligopoly increases, the

price effect decreases

As the number of firms in an oligopoly increases, the magnitude of the

the oligopolists earn the highest profit when they cooperate and behave like a monopolist.

In markets characterized by oligopoly,

as a single monopolist

As a group, oligopolists would always be better off if they would act collectively

a Nash equilibrium

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called

The firms reach the monopoly outcome

Which of these situations produces the largest profits for oligopolists?


When firms have agreements among themselves on the quantity to produce and the price at which to sell output, we refer to their form of organization as a

higher than in monopoly markets and lower than in perfectly competitive markets

The equilibrium quantity in markets characterized by oligopoly is

lower than in monopoly markets and higher than in perfectly competitive markets

The equilibrium price in a market characterized by oligopoly is


A group of firms that act in unison to maximize collective profits is called a

a monopoly

Once a cartel is formed, the market is in effect served by

greater than the price effect

An oligopolist will increase production if the output effect is

large and they do not cooperate

Oligopolies can end up looking like competitive markets if the number of firms is

as the number of firms within a given market increases, the price of the good decreases

The theory of oligopoly provides another reason that free trade can benefit all countries because

oligopoly, but it is not necessary for understanding monopoly or competition

Game theory is necessary for understanding

difficulty of maintaining cooperation

The prisoners’ dilemma provides insights into the

both prisoners confess

The likely outcome of the standard prisoners’ dilemma game is that

the best strategy for a player to follow, regardless of the strategies followed by other players.

In a game, a dominant strategy is

an outcome in which each player is doing his best given the strategies chosen by the other players. an outcome in which no player wishes to change her chosen strategy given the strategies chosen by the other players. the outcome that occurs when all players have a dominant strategy.

In game theory, a Nash equilibrium is

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