FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15: Oligopoly

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 101

Multiple Choice

Review LaterAdd Note

Review Later

Two duopoly firms that sell an identical good form a cartel. They decide to collude and fix the price of their good. In this prisoners' dilemma type situation, the likely outcome is

A) both will cheat.
B) neither one will cheat.
C) only one will cheat.
D) It is impossible to say.

E) C) and D)
F) All of the above

Correct Answer

verified

Show Answer

Question 102

Multiple Choice

Review LaterAdd Note

Review Later

If firms in an industry make output decisions that are partially based on the price and output decisions of their competitors, then these firms are in ________ market have ________ with the other firms in the market.

A) an oligopoly; interdependence
B) an oligopoly; no interdependence
C) an oligopoly or monopolistically competitive; interdependence
D) a monopolistically competitive; no interdependence

E) B) and D)
F) All of the above

Correct Answer

verified

Show Answer

Question 103

True/False

Review LaterAdd Note

Game theory is a tool for studying competitive behavior between firms in monopolistic competition because of the mutual interdependence among the firms.

Natural oligopoly is a situation where

A cartel usually has a collusive agreement to

-Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium, Dell's profit is ________ million and Gateway's profit is ________ million.

The Clayton Act of 1914 was passed to prohibit, in part, price discrimination if the effect is to substantially lessen competition or create monopoly.

Which of the following is illegal under the Sherman Act? I. A competitor agrees with another competitor on the price at which the product will be sold. II) A manufacturer refuses to supply a retailer who does not accept the manufacturer's guidance on the price.

Which of the following business practices, if proven to exist, is always illegal under U.S. antitrust law?

A contestable market is one in which

In the oligopoly price-fixing game, the payoffs are the

A cartel is a group of firms that

-Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is TRUE?

In the United States, why are cartels among firms usually kept secret?

In a prisoner's dilemma, the Nash equilibrium occurs where

Game theory is applicable to oligopoly behavior because oligopolists

Nimbus, Inc., and Cleansweep, Inc., are the only producers of flying brooms. Each firm has two strategies: Spend 30,000 galleons a year on research and development (R&D) or spend nothing on R&D. If neither firm spends on R&D, Nimbus' economic profit is 80, 000 galleons and Cleansweep's economic profit is 40,000 galleons. If each firm conducts R&D, market shares are maintained, but each firm's profit is lower by the amount spent on R&D. If Nimbus conducts R&D and Cleansweep does not, Nimbus makes an economic profit of 120,000 galleons, while Cleansweep incurs an economic loss of 20,000 galleons. If Cleansweep conducts R&D and Nimbus does not, Cleansweep makes a profit of 60,000 galleons while Nimbus loses 10,000 galleons. a) Construct a payoff matrix for the game that Nimbus and Cleansweep must play. b) Find the Nash equilibrium. In the Nash equilibrium, what is each firm's equilibrium profit? c) What is the cooperative outcome? Would the firms make more economic profit if they collude to achieve the cooperative outcome?

Is collusion possible in monopolistic competition? Why or why not?

Explain what a cartel is and the difficulties faced in maintaining a cartel.

-The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result