31) When large firms in oligopoly markets cut their prices
A) rival firms will also cut their prices to avoid losing sales.
B) rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts.
C) we don't know for sure how rival firms will respond.
D) rival firms will not cut their prices because they fear that the federal government will accuse them of collusion.
32) The fraction of an industry's sales that are accounted for by the largest firms is called
A) the four-firm competition ratio.
B) the four-firm concentration ratio.
C) the four-firm industry ratio.
D) the four-firm oligopoly ratio.
33) A four-firm concentration ratio measures
A) the extent to which industry sales are concentrated among the four largest firms in the industry.
B) the price elasticity of demand among the four largest firms in an industry.
C) the number of firms in an industry.
D) the price elasticity of demand in an industry.
34) As a measure of competition in an industry, concentration ratios have several flaws. One of these flaws is that concentration ratios
A) assume that all industries have low barriers to entry.
B) assume that a ratio less than 40 percent means an industry is perfectly competitive.
C) assume there are only four firms in an industry.
D) are calculated for the national market, even though competition in some industries is mainly local.
35) Which of the following is not a characteristic of oligopoly?
A) the ability to influence price
B) a small number of firms
C) low barriers to entry
D) interdependent firms
36) Which of the following is not a barrier to entry?
A) an inelastic demand curve
B) economies of scale
C) ownership of a key input
D) a patent
37) Economies of scale will create a barrier to entry in an oligopoly industry when
A) a firm's minimum efficient scale occurs where long-run average total costs are constant.
B) the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a large fraction of total industry sales.
C) the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a small fraction of total industry sales.
D) the industry's four-firm concentration ratio is less than 40 percent.
38) If economies of scale are relatively important in an industry, the typical firm's
A) marginal cost curve will decline continuously until it reaches minimum efficient scale.
B) long-run average cost curve will begin rising before it reaches minimum efficient scale.
C) long-run average cost curve will reach a minimum at a level of output that leaves room for a large number of firms to enter the industry.
D) long-run average cost curve will reach a minimum at a level of output that is a relatively large fraction of total industry sales.
39) A patent is an example of
A) how ownership of a key input creates a barrier to entry.
B) a government-imposed barrier to entry.
C) occupational licensing.
D) how market failure can lead to oligopoly.
40) For many years the Aluminum Company of America (Alcoa) controlled most of the world's supply of high quality bauxite, the ore needed to produce aluminum. What type of entry barrier was responsible for Alcoa's position in the aluminum industry?
A) ownership of a key input
B) a government-imposed barrier
C) a patent on the manufacture of aluminum
D) economies of scale
