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1.Which concept in game theory is commonly used to analyze oligopoly behavior?

Prisoner's DilemmaMonopoly CellJailhouse SentencesJury Box

2.ABC Publishing offers an economics textbook along with a study guide. Raheel values the textbook at Rs 75 and the study guide at Rs 15, while Mariam values the textbook at Rs 60 and the study guide at Rs 25. Assuming the marginal cost of producing both items is zero, what combined price should ABC Publishing set when pricing the textbook and study guide separately to maximize revenue?

3.What do many economists believe is the valid reason behind resale price maintenance?

It serves to prevent discount sellers from benefiting unfairly from the services offered by full-service retailers.It constitutes price fixing and is thus illegal.It is a form of price fixing, making it unlawful, while also increasing the producer's market control.It increases the producer's dominance in the market.

4.What happens to the market price as the number of sellers in an oligopoly grows?

The total production decreases since each company reduces its output.Market prices deviate more from the marginal cost.Collaboration becomes easier because more firms can enforce discipline on any deviating member.The market price tends to approach the marginal cost.There is no change in the price or output levels.

5.When an oligopolist independently determines its production quantity to maximize profits, how does its output compare to that of a monopoly and a perfectly competitive market?

It produces a quantity greater than a monopoly but smaller than that of a competitive market.It produces less than a monopoly but more than a perfectly competitive market.It produces less than both a monopoly and a perfectly competitive market.It produces more than both a monopoly and a perfectly competitive market.It produces the same quantity as a monopoly.

6.If an oligopolist aims to maximize profits and finds that the output effect on the marginal unit is greater than the price effect, what action should the firm take?

7.What do we call a market structure where numerous companies offer products that are close substitutes but not exactly the same?

Monopolistic competitionMonopolyPerfect competitionOligopoly

8.What is the primary characteristic of a cartel?

Companies actively compete with one anotherFrequent price battles occurBusinesses lower prices to attract customers from rivalsCompanies cooperate to control pricesNone of the above

9.According to the kinked demand curve model, what is a common characteristic of firms' behavior?

The marginal cost curve exhibits a distinct bendThe demand remains unresponsive to price changesThe demand reacts strongly to price variationsFirms tend to compete through means other than pricePrices fluctuate frequently due to competition

10.What is the primary assumption behind the kinked demand curve theory?

Businesses work togetherCompanies operate as a cartelCompanies behave competitivelyBusinesses do not aim to maximize profits

11.Within a cartel, member companies are often assigned a predetermined production level. What is this allocation known as?

12.What is the term for laws that prohibit companies from conspiring to increase prices or limit output?

13.ABC Publishing offers an economics textbook along with a study guide. Raheel values the textbook at Rs 75 and the study guide at Rs 15. Mariam values the textbook at Rs 60 and the study guide at Rs 25. Assuming the marginal cost of producing both items is zero, what is the optimal bundled price ABC Publishing should set if it decides to sell the two products together?

14.Why is it challenging for firms in an oligopoly to sustain collusion?

All of the above reasonsWhen new competitors join the oligopolyDue to antitrust regulations that prohibit collusionBecause individual firms' self-interest clashes with collective cooperation

15.What is the term for a scenario where oligopolistic firms select their optimal strategies based on the strategies chosen by their competitors?

16.When an oligopolist independently determines its output to maximize profits, the price it sets is typically:

Higher than the price set by both a monopoly and a perfectly competitive marketLower than the price established by either a monopoly or a competitive marketGreater than the monopoly price but below the price in a competitive marketBelow the monopoly price yet above the price found in a competitive marketEqual to the price charged in a perfectly competitive market

17.What happens to an oligopolistic market as the number of sellers increases significantly?

a single seller dominating the marketa market characterized by perfect competitiona market with many sellers offering differentiated productsa scenario where firms cooperate to fix pricesnone of the above

18.When firms in an oligopoly collude and successfully establish a cartel, what is the resulting market condition?

Identical to the outcome under perfect competition.Optimal because collaboration enhances overall efficiency.Equivalent to the market scenario under a single monopoly.Referred to as a Nash equilibrium.

19.Which market structure best characterizes the hand tools industry (including products like hammers and screwdrivers) dominated by Draper Stanley and Craftsman?

A market with many sellers offering differentiated productsA market controlled by a single sellerA market dominated by a few large firmsA market with numerous sellers and identical productsNone of the above

20.What is a common issue faced by members of a cartel?

Every firm independently aims to maximize its own profitsParticipants often have motivation to break the agreementThe entire sector operates at a lossMonitoring the agreement is unnecessary

Oligopoly – MCQs