Chapter 10 True or False Quiz

. A duopoly is an oligopoly in which several firms duel for consumer demand.

. A differentiated oligopoly is a form of market organization where several different large firms produce a homogeneous commodity.

. Oligopoly is the prevalent form of market organization in the manufacturing sectors of industrial nations.

. A market may be organized as an oligopoly if there are many producers of a product, but transportation costs limit the number that compete directly on a local market.

. Oligopolistic markets are characterized by rivalries between firms that arise because the actions of each firm in an industry have an effect on the other firms in the industry.

. Limit pricing refers to the oligopolistic practice of charging a price so low that new firms are discouraged from entering the industry.

. The sources of oligopoly are generally the same as for monopoly, i.e., barriers to entry.

. Concentration ratios measure the total number of firms required to produce the total output of an industry.

. The Herfindahl index is equal to the sum of the market shares of all firms in an industry.

. If the concentration ratio for an industry is small, then the Herfindahl index is likely to be large.

. An oligopolistic industry is likely to have a large concentration ratio and a large Herfindahl index.

. The theory of contestable markets holds that an industry without barriers to entry or exit will operate as if it is perfectly competitive.

. The Cournot model is defined as a non-oligopolistic model.

. Firms described by the Cournot model assume that their rivals will keep their rates of production constant.

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Reference to the "Cournot" model is derived by merging "Course"€ and "not"€ into a single word and is a response to the question "Is this firm a monopolist?"

. The Cournot model focuses on interdependence among firms.

. An industry that can be described by the Cournot model will produce total output that is the same as that produced by a perfectly competitive industry, however they will charge a higher price.

. The kinked demand curve model describes a monopolistically competitive market.

. The kinked demand curve model provides an explanation of price rigidity in the face of changes in costs.

. The kinked demand curve model describes a demand curve that is very elastic for price cuts and less elastic for price increases.

. The marginal revenue curve associated with the kinked demand curve is vertical at the current market price.

. Oligopolists prefer to avoid engaging in nonprice competition.

. Collusion is illegal in the United States, but is legal in many other parts of the world.

. A cartel is an organization of colluding oligopolists.

. Cartels tend to self-destruct because each member has an incentive to cheat.

. Price leadership is an example of tacit collusion.

. The dominant-firm price leadership model describes a market structure in which a dominant firm is the price maker and all other firms are price takers.

. There is no general theory of oligopoly.

. The sector in which the size of the largest firms has grown most is banking.

. The sales maximization model assumes that firms will always continue to increase output until marginal revenue is equal to zero.

. If a firm with marginal cost equal to $2 faces a demand curve defined as QD = 100 5P, then revenue is at a maximum when price is $10.

. If a firm with marginal cost equal to $2 faces a demand curve defined as QD = 100 5P, then profit is at a maximum when price is $10.

. The movement towards globalization has been slowed by changes in the telecommunications and transportation industries.

. Firms in the entertainment and communications industry have grown and globalized by means of mergers.

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A firm's architecture is defined by the buildings and furnishings that it owns.

. Successful firms concentrate on their core competencies and outsource all other activities.

. In order to compete successfully in global markets, firms should sacrifice agility for the economies of scale associated with large production facilities.

. The steel industry is comprised of virtual corporations.

. A virtual corporation is a temporary network of independent companies.

. Relationship enterprises are more limited and temporary than virtual corporations.

. Porter's strategic framework describes a structure based on five forces.

. Porter's strategic framework describes the strategies that firms should follow to maximize profits.

. According to Porter's strategic framework, profits will be lower in industries where suppliers have a high degree of bargaining power.

. If a firm produces a unique product and inspires a brand loyalty, it will tend to have higher profits.

. The creative company relies on six sigma to increase the efficiency of production.

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