Practice Questions
Click any question to see detailed solutions
In an oligopoly, when firms engage in collusion, what is the primary goal they aim to achieve?
Firms in an oligopoly often work together to set prices and limit competition. Other options are incorrect because Some might think collusion increase...
In an oligopoly market, if two firms A and B engage in a price war, what is the likely outcome in terms of economic profit, assuming both firms reach a Nash Equilibrium?
In a price war, firms lower prices to compete. Other options are incorrect because Some might think both firms can still make money; It's a common bel...
In an oligopolistic market, if firms engage in collusion and one of the firms adopts price leadership, what is likely to happen to the overall market price?
When firms in an oligopoly work together, they can set higher prices. Other options are incorrect because Some might think that prices will drop sharp...
How does the kinked demand curve model explain the pricing behavior of firms in an oligopolistic market, particularly in terms of market power and barriers to entry?
In an oligopoly, firms watch each other closely. Other options are incorrect because Some might think firms always drop prices to attract customers; I...
In an oligopolistic market, how does collusion affect economic profit maximization among firms?
When firms in an oligopoly work together, they can agree to raise prices. Other options are incorrect because Some might think that collusion lowers p...
In an oligopoly market structure, which of the following statements best describes economic profit?
In an oligopoly, some companies can keep making profits over time. Other options are incorrect because Some people think all firms must earn zero prof...
In an oligopoly, firms have market power and can influence prices. What is the main characteristic that allows these firms to earn economic profit in the long run?
High barriers to entry mean it's hard for new companies to join the market. Other options are incorrect because Some might think that perfect competit...
In a market characterized by oligopoly, which of the following best describes economic profit?
Oligopolistic firms can make extra money, called economic profit, because there are barriers that stop new companies from entering the market. Other o...
Arrange the following steps in the correct order to understand how economic profit influences firm behavior in an oligopoly after a new competitor enters the market: A) Firms adjust their pricing strategies based on competitors' actions; B) A new competitor enters the market and affects supply; C) Firms evaluate their economic profit by comparing price to average total cost; D) The market reaches a new equilibrium price and quantity.
First, a new competitor enters the market, changing supply. Other options are incorrect because This option suggests firms evaluate profits before see...
In an oligopoly market, if Gary's Gym is earning a positive economic profit, it means that the price is greater than the __________.
When the price is higher than the average total cost, it means the gym makes money. Other options are incorrect because Some might think that if price...
In an oligopoly, how does the entry of a new competitor like eFitness affect Gary's Gym's economic profit and strategic decisions?
When eFitness enters the market, Gary's Gym may lower its prices. Other options are incorrect because Some might think raising prices is smart to make...
Which of the following statements accurately describe the relationship between economic profit and oligopoly? Select all that apply.
Other options are incorrect because This suggests that firms can always make profits if prices are high; This implies that price is the only way firms...
If Gary's Gym is earning a positive economic profit, what can we infer about its pricing strategy in relation to average total cost?
When a business makes a positive economic profit, it means it earns more than its total costs. Other options are incorrect because Some might think th...
Gary's Gym is currently earning a positive economic profit due to a price of $50 per membership, while its average total cost is $40. If eFitness enters the market and both gyms decide to lower their prices to $45 to attract more customers, what is the likely outcome for Gary's Gym in terms of economic profit in the short run?
When Gary's Gym lowers its price to $45, it matches its average total cost of $40. Other options are incorrect because Some might think that lowering ...
If Gary's Gym is earning a positive economic profit due to the price being greater than the average total cost, what is most likely to happen in the market as a result of new competitors entering the oligopoly?
When a business makes extra money, it attracts others to join. Other options are incorrect because Some might think that a gym can keep raising prices...
Economic profit : Average Total Cost :: Market Entry : ?
When a new company enters a market, it often uses strategic pricing. Other options are incorrect because Some might think that entering a market means...
Gary's Gym is earning a positive economic profit due to its price exceeding average total cost. How would the entry of eFitness into the market, an oligopoly competitor, primarily affect Gary's Gym's pricing strategy and economic profit classification?
Gary's Gym will likely have to lower its prices to compete with eFitness. Other options are incorrect because This answer suggests that competition do...
Master Economic Profit and Oligopoly
Ready to take your understanding to the next level? Access personalized practice sessions, progress tracking, and advanced learning tools.