Tackle the Test: Multiple-Choice Questions

1. Question

   When firms cooperate to raise their joint profits, they are necessarily

   A.

   colluding.

   B.

   in a cartel.

   C.

   a monopoly.

   D.

   in a duopoly.

   E.

   in a competitive industry.

   When firms cooperate to raise their joint profits, they are necessarily
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   Question

   Use the information in the table below on market shares in the search engine industry and measures of market power (defined in Section 10) to determine which of the following statements are correct.

   
   

   
   

   
   

   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   

   Search Engine	Market share
   Google	44%
   Yahoo	29
   MSN	13
   AOL	6
   Ask	5
   Other	3

   
   

   
   

   
   

   1. The 4-firm concentration ratio is 92.

      
      
   
   

   2. The Herfindahl–Hirschman index is 3,016.

      
      
   
   

   3. The industry is likely to be an oligopoly.

      
      
   
   

   A.

   I only

   B.

   II only

   C.

   III only

   D.

   I and II only

   E.

   I, II, and III

   Use the information in the table below on market shares in the search engine industry and measures of market power (defined in Section 10) to determine which of the following statements are correct.

3. Question

   An agreement among several producers to restrict output and increase profit is necessary for

   A.

   cooperation.

   B.

   collusion.

   C.

   monopolization.

   D.

   a cartel.

   E.

   competition.

   An agreement among several producers to restrict output and increase profit is necessary for

4. Question

   Oligopolists are tempted to produce more than the quantity that would maximize industry profits because when they increase output,

   A.

   the price effect is zero.

   B.

   the quantity effect is zero.

   C.

   the price effect equals the quantity effect.

   D.

   the price effect is larger than the quantity effect.

   E.

   the price effect is spread across multiple firms.

   Oligopolists are tempted to produce more than the quantity that would maximize industry profits because when they increase output,

5. Question

   Which of the following will make it easier for firms in an industry to maintain positive economic profit?

   A.

   a ban on cartels

   B.

   a small number of firms in the industry

   C.

   a lack of product differentiation

   D.

   low start-up costs for new firms

   E.

   the assumption by firms that other firms have variable output levels

   Which of the following will make it easier for firms in an industry to maintain positive economic profit?