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Student Self-test Questions
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1
All of the following are types of imperfect competition except:
A)monopolistic competition
B)oligopoly
C)monopoly
D)unfair competition
2
An imperfectly competitive firm faces a ________________ demand curve.
A)horizontal
B)vertical
C)downward-sloping
D)u-shaped
3
An industry with _____________ has many sellers of products that are close substitutes for one another.
A)monopolistic competition
B)oligopoly
C)monopoly
D)perfect competition
4
The N-firm concentration ratio is the market share of the smallest N firms in the industry.
A)True
B)False
5
OPEC is an example of a:
A)kinked demand curve.
B)Cournot model.
C)Bertrand model.
D)cartel.
6
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
7
The long run equilibrium in monopolistic competition involves firms making positive excess profits.
A)True
B)False
8
A long-run tangency equilibrium, in which each firm’s demand curve just touches its AC curve at the output level, at which marginal cost equals marginal revenue is achieved in:
A)monopoly.
B)the Cournot model.
C)monopolistic competition.
D)Nash equilibrium.
9
In _____ equilibrium, each player chooses the best strategy, given the strategies being followed by other players.
A)Cournot
B)Bertrand
C)Monopolistic
D)Nash
10
A dominant strategy is a player's best strategy whatever the strategies adopted by rivals.
A)True
B)False
11
A firm's ________________ shows how its optimal output varies with each possible action by its rival.
A)reaction function
B)demand function
C)supply function
D)cost function
12
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.
13
Game theory studies interdependent decision-making.
A)True
B)False
14
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.
15
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.
16
A Nash-Bertrand equilibrium entails lower output, higher prices, and profits than a Nash-Cournot solution.
A)True
B)False
17
The Stackelberg 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.
18
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
19
A dominant strategy is:
A)a winning strategy.
B)a losing strategy.
C)a players best strategy when moving first.
D)a player’s best strategy whatever the strategies adopted by rivals.
20
Strategic entry barriers are made by nature.
A)True
B)False





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