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Economics, 7/e
David Begg, Birkbeck College, University of London
Rudiger Dornbusch
Stanley Fischer
Market structure and imperfect competition

Self-test Questions

Select the radio button corresponding to your choice of answer for each question, and then click on "Submit Answers" to find out how many you answered correctly.

1

All of the following are types of imperfect competition except
A)monopolistic competition
B)oligopoly
C)monopoly
D)unfair competition
2

When a market is contestable, incumbent firms must _____________ to avoid the entry of new competitors
A)behave like competitive firms
B)agree to act together
C)differentiate their products
D)practise price discrimination
3

The reason for the kinked demand curve is that
A)the oligopolist believes that competitors will match output increases but not output reductions
B)the oligopolist believes that competitors will match price increases but not output reductions
C)the oligopolist believes that competitors will match price cuts but not price rises
D)the oligopolist believes that competitors will match price increases but not output increases
4

The Prisoners' Dilemma Game demonstrates that
A)players are better off to act independently
B)monopoly is better than competition
C)people will always cheat
D)players are better off if they co-operate
5

A firm adopting Cournot behaviour will __________
A)treat the output of rivals as given
B)treat the price of rivals as given
C)assume that rivals will cheat
D)have a first-mover advantage
6

The Stackleberg model shows that
A)a player moving last has an advantage
B)a player moving first has an advantage
C)it doesn't matter when a player moves
D)higher payoffs are achieved when decisions are simultaneous
7

In Nash equilibrium each player chooses the best strategy __________
A)assuming other players move first
B)dominated by the other players
C)given the strategies of other players
D)that is a credible threat
8

A dominant strategy is ____________
A)a winning strategy
B)a losing strategy
C)a player's best strategy when moving first
D)a player's best strategy whatever the strategies adopted by rivals
9

The long run equilibrium in monopolistic competition involves competitors making excess profits
A)TRUE
B)FALSE
10

Game theory studies interdependent decision-making
A)TRUE
B)FALSE
11

A Nash-Bertrand equilibrium entails lower output, higher prices, and higher profits than a Nash-Cournot solution
A)TRUE.
B)FALSE.
12

Strategic entry barriers are made by nature
A)TRUE
B)FALSE






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