Oligopoly and Price Discrimination
Quiz by Adrian Price
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10 questions
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- Q1Which of the following is not an assumption for Oligopolies?High barriers to entry and exitFirms produce differentiated goods onlyFirms are interdependentSmall number of large firms60s
- Q2Oligopolistic firms may agree on setting the price high (Collude) because...It enables firms to produce differentiated goodsThe incentive to keep the price high enables firms to maximise reveuneit will increase the levels of competition60s
- Q3Which of the following best describes the reasoning for the kinked demand curve?In the kinked demand curve model, each firm perceives the demand curve it faces to be elastic for prices above P1 and inelastic for prices below P1. If one firm raises its price above P1, the others will not follow; if it lowers its price below P1, the others will match the price decrease. In either case, the firm will be worse off. Therefore, no firm takes the initiative to change its price, and they all remain ‘stuck’ at point Z for long periods of time.In the kinked demand curve model, P1 represents the tacit collusion price.In the kinked demand curve model, each firm perceives the demand curve it faces to be elastic for prices above P1 and inelastic for prices below P1. If one firm raises its price above P1, the others will follow; if it lowers its price below P1, the others will keep the price high. In either case, the firm will be better off.In the kinked demand curve model, each firm faces two marginal cost curves. This is because one of the curves shows the firm operating at MC=MR profit maximising and the other shows the firm in collusion with other firms.120s
- Q4To calculate the CR4 or CR8 ratio you....You see how long you can look and focus on the top 4/8 firms.You total up the market share of the top 4/8 firms in the market and divide by number of firmsTotal up the market shares of the top 4/8 firms in that market.You calculate the total value of the market and divide by each firms share to calculate the firms share as a ratio to the market share120s
- Q5Which of the following methods of non price competition plays an important role in Oligopolies?Product differentiationAdvertising and BrandingBoth of theseNone of these120s
- Q6Which of the following is a reasons may economists argue advertising lowers efficiency?Advertising may create needs that consumers would not otherwise have, resulting in a waste of resources as consumers buy goods and services they would not have wanted if they were not influenced by advertising.Successful advertising increases a firm’s monopoly power.Huge sums spent on advertising by large oligopolistic firms can create barriers to the entry of new firms that cannot match such expenditures.All of these120s
- Q7Which of the following reasons could suggest advertising may increase efficiency?Advertising by rival firms increases competition between them, and therefore contributes to decreasing their monopoly power.All of theseBy facilitating the introduction of new products, advertising can help lower barriers to entry of new firms into an industry.By facilitating the introduction of new products, advertising can also provide firms with an extra incentive to engage in research and development for the development of new products.120s
- Q8Which of the following conditions does not need to be met in order for a firm to price discriminate to the third degree?Firms must be able to charge the exact price consumers are willing and able to pay.Different price elasticities of demandThe price-discriminating firm must have some market powerSeparation of consumers into groups to avoid the possibility of resale120s
- Q9Which alternative theory of the firm is this "In this view, when firm management is separated from firm ownership, managers develop their own objectives that revolve around the satisfaction they get from the job. This can be derived from increased salaries, larger fringe benefits (such as company cars and expense accounts), employment of more staff that gives rise to a feeling of importance, and investments in the managers’ favourite projects. The result of all these activities may be to cut into profits and make these lower than they would otherwise be."CSRManagerial Utility maximisationRevenue maximisationSatisficing120s
- Q10Which alternative theory of the firm is this: " the idea that firms try to achieve satisfactory rather than optimal or ‘best’ results, sometimes of a number of outcomesSatisficingRevenue MaximisationManagerial Utility maximisationCSR120s
