1. The oligopolistic firms are aware of their interdependence and always consider their
rivals’ reaction when setting prices, output goals, advertising budgets and other
business policies.
2. The firm’s demand curve as perceived by a monopoly is the same as the market
demand curve.
3. The most important variable that determines the long-run equilibrium of monopoly
markets is the adjustment to the number of firms in the market.
4. Monopolistic competitive market involves many firms which are competing against
each other but selling products that are distinctive in some way.
5. A firm will exit a market if the revenue it gets less than its total cost.
Part II: Multiple Choices
For the following questions choose the correct answer from the given alternatives.
1. Which of the following is a unique characteristic of oligopoly?
A. production of a standardized product
B. the use of advertising and product development
C. mutual interdependence among firms in the industry
D. the existence of barriers to entry including patents and copyrights
2. Under conditions of oligopoly firms may collude in order to:
A. avoid the outcome associated with uncertainty of the other firm’s reaction.
B. increase competition
C. increase market power
D. both A and C
3. Which of the following statements about oligopoly is false?
A. Under conditions of oligopoly entry into the market is difficult.
B. Each firm in an oligopoly makes decisions without regard for the actions
of other firms.
C. Game theory is used to analyze the behavior of firms in an oligopoly.
D. Firms in an oligopolistic market often have an incentive to collude.
4. Which of the following is not a characteristic of perfect competition?
A. A large number of buyers and sellers
B. the existence of only zero profit in the short run
C. uniform price
D. the absence of transparent cost