Answer to Question #52964 in Microeconomics for Yana

Question

MULTIPLE CHOICE
1. Mutual interdependence among firms in an oligopoly means that:
a. firms never practice price leadership.
b. firms never form a cartel.
c. it is difficult to know how firms will react to decisions of rivals.
d. no formal agreement is possible among firms.
2. A major characteristic of the theory of oligopoly is that:
a. there are no real-world examples.
b. the reactions of each firm depends on how the firm believes rivals will react.
c. in reality few oligopolies survive more than 10 years.
d. none of these.
3. If a firm has substantial market power, it must be operating in an industry that would be class
ified as:
a. a monopoly or oligopoly.
b. perfectly competitive.
c. monopolistically competitive.
d. perfectly competitive or monopolistically competitive.
e. perfectly competitive or a monopoly.

Answer 1

1. c. it is difficult to know how firms will react to decisions of rivals.
2. b. the reactions of each firm depends on how the firm believes rivals will react.
3. a. a monopoly or oligopoly.