MBA 701 2025 EXAM QUESTIONS AND
CORRECT ANSWERS.
D) interdependence of profits
**What is the most important characteristic of oligopoly?
A) firms have market power
B) product differentiation
C) low barriers to entry
D) interdependence of profits
E) None of the choices are correct
E) All of the choices are correct.
**In an oligopoly market,
A) a firm must lower price in order to sell more output.
B) each firm faces a demand curve that depends on how the firm’s rivals behave.
C) a few firms account for a large portion of industry sales.
D) both "firm must lower price in order to sell more output" and "each firm faces a demand
curve that depends on how the firm’s rivals behave".
E) All of the choices are correct.
A) there are few firms in the market.
**Oligopolists face interdependent profits because
A) there are few firms in the market.
B) the product is differentiated.
C) industry sales are large.
D) All of the choices are correct.
D) a strategy that leads to the best outcome no matter what a rival does.
,**In game theory, a dominant strategy is
A) a strategy used by a large firm to compete against smaller firms.
B) a strategy followed by the price leader.
C) a strategy involving a high risk but also a high return.
D) a strategy that leads to the best outcome no matter what a rival does.
E) None of the choices are correct.
D) A strategy that leads to the best outcome for a firm no matter what strategy the other
chooses.
**In game theory, what is a dominant strategy?
A) A strategy that leads to the best possible outcome for both firms.
B) Any strategy that leads to a Nash equilibrium.
C) A strategy that yields a minimax outcome.
D) A strategy that leads to the best outcome for a firm no matter what strategy the other chooses.
E) None of the choices are correct.
A) firms consider the actions of other firms when making price and output decisions.
**Interdependence occurs when
A) firms consider the actions of other firms when making price and output decisions.
B) all firms in an industry are affected by the same general economic conditions, like consumer
incomes and the unemployment rate.
C) firms cooperate to increase profit.
D) both "firms consider the actions of other firms when making price and output decisions" and
"all firms in an industry are affected by the same general economic conditions, like consumer
incomes and the unemployment rate".
E) All of the choices are correct.
D) both "maintaining excess capacity" and "limit pricing".
, **A form of strategic entry deterrence is
A) forming a cartel.
B) maintaining excess capacity.
C) limit pricing.
D) both "maintaining excess capacity" and "limit pricing".
E) All of the choices are correct.
A) to discourage the entry of new firms.
**One reason a firm or firms might charge a price lower than its profit-maximizing price is
A) to discourage the entry of new firms.
B) to follow a tit-for-tat strategy.
C) to erect multiproduct barriers to entry.
D) both "to discourage the entry of new firms" and "to erect multiproduct barriers to entry".
E) All of the choices are correct.
B) 2
**Refer to the following figure showing the reaction functions of oligopoly firms A and B. If
firm A anticipates that firm B will run 3 ads, then firm A should run _____ ads in order to
maximize its own profit.
A) 1
B) 2
C) 4
D) 5
E) 6.5
C) the price A should charge to maximize A’s profits given each possible price that B might
charge.
CORRECT ANSWERS.
D) interdependence of profits
**What is the most important characteristic of oligopoly?
A) firms have market power
B) product differentiation
C) low barriers to entry
D) interdependence of profits
E) None of the choices are correct
E) All of the choices are correct.
**In an oligopoly market,
A) a firm must lower price in order to sell more output.
B) each firm faces a demand curve that depends on how the firm’s rivals behave.
C) a few firms account for a large portion of industry sales.
D) both "firm must lower price in order to sell more output" and "each firm faces a demand
curve that depends on how the firm’s rivals behave".
E) All of the choices are correct.
A) there are few firms in the market.
**Oligopolists face interdependent profits because
A) there are few firms in the market.
B) the product is differentiated.
C) industry sales are large.
D) All of the choices are correct.
D) a strategy that leads to the best outcome no matter what a rival does.
,**In game theory, a dominant strategy is
A) a strategy used by a large firm to compete against smaller firms.
B) a strategy followed by the price leader.
C) a strategy involving a high risk but also a high return.
D) a strategy that leads to the best outcome no matter what a rival does.
E) None of the choices are correct.
D) A strategy that leads to the best outcome for a firm no matter what strategy the other
chooses.
**In game theory, what is a dominant strategy?
A) A strategy that leads to the best possible outcome for both firms.
B) Any strategy that leads to a Nash equilibrium.
C) A strategy that yields a minimax outcome.
D) A strategy that leads to the best outcome for a firm no matter what strategy the other chooses.
E) None of the choices are correct.
A) firms consider the actions of other firms when making price and output decisions.
**Interdependence occurs when
A) firms consider the actions of other firms when making price and output decisions.
B) all firms in an industry are affected by the same general economic conditions, like consumer
incomes and the unemployment rate.
C) firms cooperate to increase profit.
D) both "firms consider the actions of other firms when making price and output decisions" and
"all firms in an industry are affected by the same general economic conditions, like consumer
incomes and the unemployment rate".
E) All of the choices are correct.
D) both "maintaining excess capacity" and "limit pricing".
, **A form of strategic entry deterrence is
A) forming a cartel.
B) maintaining excess capacity.
C) limit pricing.
D) both "maintaining excess capacity" and "limit pricing".
E) All of the choices are correct.
A) to discourage the entry of new firms.
**One reason a firm or firms might charge a price lower than its profit-maximizing price is
A) to discourage the entry of new firms.
B) to follow a tit-for-tat strategy.
C) to erect multiproduct barriers to entry.
D) both "to discourage the entry of new firms" and "to erect multiproduct barriers to entry".
E) All of the choices are correct.
B) 2
**Refer to the following figure showing the reaction functions of oligopoly firms A and B. If
firm A anticipates that firm B will run 3 ads, then firm A should run _____ ads in order to
maximize its own profit.
A) 1
B) 2
C) 4
D) 5
E) 6.5
C) the price A should charge to maximize A’s profits given each possible price that B might
charge.
