Module 8 Oligopoly Multiple Choice

Module #8: Oligopoly Multiple Choice – Select the best answers to the following questions. 1. What is a defining feature of an oligopoly market? A. Zero economic profits in the long run. B. A large number of small firms. C. A few large firms with substantial market share. D. Firms that operate under government control. E. Complete product uniformity. 2. Which of the following is used to measure the level of market concentration in an industry? A. Price Elasticity Index B. Consumer Surplus Ratio C. Fixed Cost Index D. Total Revenue Margin E. Concentration Ratio (CR) 3. What kind of oligopoly features one dominant firm with many smaller firms? A. Loose oligopoly. B. Competitive monopoly. C. Dominant firm with a competitive fringe. D. Duopoly. E. Horizontal merger. 4. Why are cartels difficult to maintain? A. They are generally legal so they face minimal regulation. B. Firms have an incentive to cheat for higher profits. C. Firms do not have any incentive to collude. D. Cartels operate under perfect competition. E. Government subsidies protect cartels. 5. What does the Herfindahl-Hirschmann Index (HHI) emphasize more than concentration ratios? A. Total number of firms in a market. B. Overall market revenue. C. Distribution of market shares among top firms. D. Whether firms produce substitutes. E. Consumer demand elasticity. 6. Which of the following industries has the least amount of competition based on the reported CR4 value? A. Industry A: CR4 = 42 B. Industry B: CR4 = 29 C. Industry C: CR4 = 14 D. Industry D: CR4 = 50 E. Industry E: CR4 = 86 7. Which integration merges two firms at different stages of the same value chain? A. Horizontal integration B. Diagonal integration C. Vertical integration D. Lateral integration E. Market integration 8. Why might a firm pursue upstream vertical integration? A. To gain an advantage in producing a final good by using their own components. B. To gain direct access to suppliers. C. To expand advertising strategies. D. To open new retail locations. E. To merge with direct competitors. 9. What is a key benefit of a conglomerate merger? A. Reducing competition among similar firms. B. Product costs become more certain. C. Collusion becomes possible. D. Diversifying production makes the firm more stable. E. The firm can start to avoid taxes. 10. The Sherman Antitrust Act of 1890 primarily targeted which business behavior? A. Horizontal mergers. B. Product bundling. C. Collusion and monopolization. D. Vertical expansion. E. Price discrimination. 11. What type of activity is banned by the Robinson-Patman Act? A. Mergers. B. Charging different prices to different buyers. C. Colluding and creating trusts. D. Growing so big that the firm becomes a monopolist. E. Issuing patents. 12. What was the primary outcome of the Federal Trade Commission Act of 1914? A. Establishing the minimum wage. B. Creating the Federal Reserve. C. Creating an agency to investigate unfair business practices. D. Prohibiting conglomerate mergers. E. Eliminating tariffs on imports. 13. What does a post-merger HHI above 2500 with an increase of more than 200 points signal? A. A monopolistically competitive market is rising. B. A loose oligopoly is rising. C. A tight oligopoly is rising and government intervention may be needed. D. Firms in the merger aren’t profitable enough to be stable. E. The industry is becoming more competitive. 14. Which type of firm growth relies on reinvesting profits into production and expansion? A. Acquisition-based. B. Collusive growth. C. Organic (internal) growth. D. Involuntary growth. E. Monopoly transfer. 15. What kind of merger occurs between firms producing similar goods at the same value chain level? A. Upstream integration. B. Conglomerate merger. C. Horizontal integration. D. Mixed integration. E. Competitive merger. 16. What makes game theory useful in analyzing oligopolies? A. It ignores competitor behavior. B. It assumes firms act independently. C. It models strategic interactions between firms. D. It focuses solely on consumer utility. E. It predicts equilibrium in monopolistic markets. 17. Which of the following is a feature of duopoly? A. Unlimited number of buyers and sellers. B. One dominant firm with many smaller rivals. C. Two firms splitting market control. D. No interdependence in decision-making. E. A ban on all forms of integration. 18. What is the effect of economies of scale on oligopoly formation? A. It encourages small firm entry. B. It raises per-unit costs. C. It drives competitors out by lowering costs. D. It limits profit margins. E. It creates perfect substitutes. 19. Which anti-trust act focused on preventing harmful mergers? A. Sherman Act. B. Clayton Act. C. Celler-Kefauver Act. D. Federal Reserve Act. E. None of the above. 20. A CR4 value of 35 and an HHI of 950 suggest: A. A monopoly. B. A tight oligopoly C. A moderately competitive market. D. A dominant firm. E. A duopoly. 21. Why might a cartel need punishment strategies for its members? A. To increase taxes. B. To maximize consumer surplus. C. To reduce the market power of members. D. To comply with anti-trust laws. E. To keep members from cheating and breaking agreements. 22. Which industry did John D. Rockefeller participate during the late 1800s/early 1900s? A. Oil B. Steel C. Railroads D. Banking E. Meat and processed foods. 23. The FTC and Department of Justice use the HHI to: A. Determine consumer preferences. B. Regulate worker compensation. C. Assess market concentration after mergers. D. Calculate government subsidies. E. Track product variety. 24. What does the term “cash cow” refer to in a conglomerate? A. A product line that consistently loses money. B. A highly profitable division that funds others. C. An external investor. D. A merger with a smaller firm. E. A market with fluctuating demand. 25. Which of the following is a possible outcome of vertical integration? A. Increased input price uncertainty. B. Higher coordination costs. C. Elimination of supply chain disruptions. D. Less control over production. E. Decreased firm size.