Ch 11 - The World of Imperfect Competition

Question 1

A market structure with more than one firm in an industry in which at least one firm is a price setter is called…

Answer 1

Imperfect competition

Question 2

A model characterized by many firms producing similar but differentiated products in a market with easy entry and exist is called…

Answer 2

Monopolistic competition

Question 3

A firm that operates to the left of the lowest point on it’s average total cost curve has…

Answer 3

Excess capacity

Question 4

A market structure that is dominated by a few firms, each of which recognizes that it’s own actions will produce a response from its rivals and that those responses will affect it is called an….

Answer 4

Oligopoly

Question 5

A __________ reports the percentage of output accounted for by the largest firms in an industry.

Answer 5

Concentration ratio

Question 6

An alternative measure of concentration that is found by squaring the percentage share (stated as a whole number) of each firm in an industry, then summing these squared market shares which derives what is called as….

Answer 6

A Herfindahl-Hirschman Index (HHI)

Question 7

An industry with two firms is called a…

Answer 7

Duopoly

Question 8

When firms openly agree on price, output, and other decisions aimed at achieving monopoly profits, this is called….

Answer 8

Overt collusion

Question 9

Firms the coordinate their activities through overt collusion and by forming collusive coordinating mechanisms make up a….

Answer 9

Cartel

Question 10

An unwritten, unspoken understanding through which firms agree to limit their competition is called…

Answer 10

Tacit collusion

Question 11

A choice based on the recognition that the actions of others will affect the outcome of the choice and that takes these possible actions into account is called….

Answer 11

Strategic choice

Question 12

An analytical approach through which strategic choices can be assessed is called…

Answer 12

Game theory

Question 13

When a player’s best strategy is the same regardless if the action of the other player, that strategy is said to be a…

Answer 13

Dominant strategy

Question 14

A game in which there is a dominant strategy for each player is called a…

Answer 14

Dominant strategy equilibrium

Question 15

In a ________ strategy a firm responds to cheating by cheating, and it responds to cooperative behavior by cooperating

Answer 15

Tit-for-tat

Question 16

One way that firms may seek to force rivals to behave cooperatively rather than competitively is to use a strategy in which a firm makes clear that it is willing and able to respond to cheating by permanently revoking an agreement. This is called….

Answer 16

A trigger strategy