Chapter 8 Market Entry, Monopolistic Competition, and Oligopoly

A) perfectly competition

B) an oligopoly

C) a monopoly

D) a natural monopoly

7) The Herfindahl-Hirschman Index measures

A) the degree of concentration in a market.

B) the percentage of market share held by the four largest firms in a market.

C) the percentage of market share held by the largest firm in a market.

D) the market share held by the largest firm in a market divided by the market share held by all other firms in the market.

8) Oligopoly differs from monopoly and perfect competition in that

A) firms consider each others actions when choosing price and quantity.

B) there are a few firms in the industry.

C) firms act strategically.

D) all of the above

9) Suppose that there are five firms in a market, each controlling 20% of the market. The HHI would equal

A) 10.

B) 100.

C) 1,000.

D) 2,000.

10) Compare two markets. In one market, the HHI is 500, in the other market the HHI is 1,500. What must be true of these two markets?

A) The firms in the market in which the HHI is 1,500 have greater market power than do the firms in the market in which the HHI is 500.

B) There are more firms in the market in which the HHI is 1,500 than in the market in which the HHI is 500.

C) The firms in the market in which the HHI is 1,500 have less market power than do the firms in the market in which the HHI is 500.

D) The market in which the HHI is 500 is, by definition, an oligopoly but the market in which the HHI is 1,500 is not an oligopoly.

11) A high degree of concentration in a market suggests that firms in that market

A) have the power to control prices.

B) are perfectly competitive.

C) cannot act strategically.

D) have formed an illegal cartel.

12) Market power is the power to

A) control prices.

B) gain another firm's customers.

C) reduce price below cost to deter entry.

D) control output.

13) When economies of scale are present, but sufficiently large to generate a natural monopoly, the expected market structure is

A) monopoly.

B) monopolistic competition.

C) perfect competition.

D) oligopoly.

14) Which one of the following is the best example of an oligopolistic industry?

A) cigarettes

B) wheat growers

C) apple growers

D) public utilities

15) Which one of the following is the best example of an oligopolistic industry?

A) long-distance telephone service

B) wheat growers

C) apple growers

D) public utilities