Question 1

Which of the following best defines an oligopoly?

Accepted Answer

An imperfectly competitive industry with a high level of market concentration, dominated by a few large firms.

Question 2

Suppose the market shares of the top five firms in an industry are 20%, 18%, 15%, 12%, and 10%. What is the 5-firm concentration ratio, and does this industry qualify as an oligopoly?

Accepted Answer

The concentration ratio is $$75\%$$, and the industry qualifies as an oligopoly.

Question 3

Which of the following is NOT a key characteristic of an oligopoly?

Accepted Answer

Firms act independently without considering rivals.

Question 4

What does the concentration ratio measure?

Accepted Answer

The combined market share of a leading group of firms in a defined market.

Question 5

If the 5-firm concentration ratio in a market is $$65\%$$, what does this indicate about the market structure?

Accepted Answer

The market is likely an oligopoly.

Question 6

Which of the following is an example of non-price competition in an oligopoly?

Accepted Answer

Increasing advertising expenditure to promote brand loyalty.

Question 7

Why are barriers to entry important in oligopolistic markets?

Accepted Answer

They prevent new firms from easily entering the market, maintaining the dominance of existing firms.

Question 8

Which scenario best illustrates interdependence in an oligopoly?

Accepted Answer

A firm increases advertising after a rival launches a new product.

Question 9

A supermarket industry has the following market shares: Tesco 27%, Sainsbury 15%, Asda 14%, Aldi 10%, Morrisons 9%, Lidl 8%. What is the 5-firm concentration ratio?

Accepted Answer

$$75\%$$

Question 10

Which of the following is a real-world example of a barrier to entry in an oligopolistic market?

Accepted Answer

Established brand loyalty among consumers.

Question 11

Why might firms in an oligopoly prefer non-price competition over price competition?

Accepted Answer

Price competition can lead to destructive price wars, reducing profits for all firms.

Question 12

Which of the following best describes product branding as a form of non-price competition?

Accepted Answer

Creating a unique identity for a product to differentiate it from rivals.

Question 13

If a firm in an oligopoly raises its prices, what is a likely response from its competitors?

Accepted Answer

Competitors may also raise their prices to maintain profits.

Question 14

Which of the following is NOT a typical strategy used in non-price competition?

Accepted Answer

Price undercutting.

Question 15

A market is considered an oligopoly if the 5-firm concentration ratio exceeds what percentage?

Accepted Answer

$$60\%$$

Question 16

Which of the following best explains why oligopolistic markets are often unpredictable and volatile?

Accepted Answer

Firms are interdependent and must react to each other's decisions.

Question 17

Which of the following is a likely outcome if a new firm tries to enter an oligopolistic market with high barriers to entry?

Accepted Answer

The new firm will struggle due to established firms' advantages such as economies of scale and brand loyalty.

Question 18

Which of the following is an example of a household brand effective across global markets, as seen in oligopolistic industries?

Accepted Answer

A multinational company like Coca-Cola.

Question 19

If the combined market share of the top three firms in an industry is $$55\%$$, and the next two firms have $$8\%$$ and $$7\%$$ respectively, what is the 5-firm concentration ratio?

Accepted Answer

$$70\%$$

Question 20

Which of the following best describes the role of advertising in an oligopolistic market?

Accepted Answer

Advertising is a key tool for non-price competition, helping firms differentiate their products.

Oligopoly: Structure, Measurement, and Key Characteristics

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