Question

In: Economics

1. The minimum efficient scale of production is such that an industry has only four large...

1. The minimum efficient scale of production is such that an industry has only four large firms. This would be termed ____________.

A. a four-firm industry

B. an oligopoly

C. a cartel

D. a natural monopoly

2. In an oligopoly with a few large firms, which of the following is true?

A. Each firm has independent control over the price it sets.

B. Firms are interdependent.

C. Firms fail to try to maximize profits.

D. Each firm adjusts its price to damage its rivals.

3. Oligopoly may be associated with each of the following except _________.

A. many firms

B. collusion

C. price leadership

D. cartels

4. If oligopolistic firms set up a formal agreement to act together like a monopoly, then this is known as ________________.

A. an oligopolistic monopoly

B. a cartel

C. a natural monopoly

D. an artificial monopoly

5. Game theory may be particularly useful in analyzing behavior in ______________.

A. a monopoly

B. perfect competition

C. monopolistic competition

D. an oligopoly

Expert Solution

1. In industries where the ratio of fixed cost to variable cost is high, the industry is able to reduce the unit cost by increasing the scale of output and reach to minimum efficient scale. This results in the emergence of market like Oligopoly, Duopoly and monopoly. In an oligopoly market there are a few firms.

B. an oligopoly.

2. The oligopoly market is characterized by a small number of big firms. The market share of each firm is so significant that its price and output policy creates significant impact on the price and output policy of rival firms. Thus there is a high degree of interdependence among the competing firms.

B. Firms are interdependent.

3. Collusion, price leadership and cartels are the features of oligopoly. But there are only a small number of firms but not many.

A. Many firms.

4. Cartel is a form of agreement among the firms in an oligopoly regarding the price and output.

B. Cartel.

5. Under oligopoly each firm in their course of action considers how others will respond to the action.

D. an oligopoly

Rahul Sunny answered 2 years ago

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