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Oligopolies and Economics

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These are multiple choice for pretest and study purposes .Please provide feedback and the reason for the choice.
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Question 1 Barriers to entry in oligopolies may arise from:
diseconomies of scale.
diminishing returns.
economies of scale.
patent expirations.

If the incumbents enjoy economies, they have low costs, it creates barriers: economies of scale.

Question 2 When participants in a game take actions that are consistent with Nash equilibrium:
no single participant has an incentive to change its action.
each participant has chosen the best action possible, given what the others have chosen.
no other set of actions could make ALL participants better off.

both a and b.
At Nash equilibrium, the total gains are less than what they would be if no action was taken but since such an outcome is unstable, neither firm has an incentive to vary its strategy at this point, also each firm is doing the best it can given what its rivals are doing: both a and b.

Question 3 If significant economies of scale exist in an industry, then:
a firm that is large is able to produce at a lower unit cost than can a small firm.
a firm that is large will have to charge a higher price than will a small firm.
entry to that industry will be easy.
firms must differentiate their products to earn economic profits.

The larger firm gets more economies, that is lower costs: a firm that is large is able to produce at a lower unit cost than can a small firm.

Question 4 Which of the following statements is true about oligopolies?
A firm must lower price in order to sell more output.
A few firms account for a large portion of industry sales.
All of the above

In oligopoly by definition there are few firms, the demand curve depends on the behavior of competitors, for example the kinked demand curve depends on competitor behavior, and the firm must lower its price to sell more. : All of the above

Question 5 Factors that ...

Solution Summary

Barriers to entry in oligopolies are discussed step-by-step in this solution. The response also has the sources used.

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Would be set where the sum of their MC's equals to the industry's MR.

Would be determined by a federal mediator.

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