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Exam 17: Oligopoly

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Question 41

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Table 17-13 Suppose that Robert and Howard own the only two movie studios in California. Each producer must choose between a low budget and a high budget strategy for his next film. The economic profit from each strategy is indicated in the table below: Howard Low budget High budget -Refer to Table 17-13. Does Robert have a dominant strategy? If so, describe it.

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Yes, regardless of Howard's strategy, Ro...

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Question 42

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Suppose the market for home-grown peppers in the town of Smallville is comprised of two farmers. Suppose the two farmers try to collude. Explain why their collusion might not be successful.

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The two farmers might try to determine t...

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Question 43

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In a prisoner's dilemma, only one firm has a dominant strategy. ​

All examples of the prisoner's dilemma game are characterized by one and only one Nash equilibrium.

Ford and General Motors are considering expanding into the Vietnamese automobile market. Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision.

Briefly describe the business practice of tying.

Compare the equilibrium output in a duopoly to the monopoly output.

Table 17-8 This table shows the payoffs for a game played between two players, A and B. -Refer to Table 17-8. If player B chooses Right, player A should choose

Table 17-4 Only two firms, JKL and XYZ, sell a particular product. The following table shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost. ​ ​ $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Total Revenue } \\\text { (Dollars) }\end{array} \\\hline 28 & 0 & 0 \\\hline 26 & 5 & 130 \\\hline 24 & 10 & 240 \\\hline 22 & 15 & 330 \\\hline 20 & 20 & 400 \\\hline 18 & 25 & 450 \\\hline 16 & 30 & 480 \\\hline 14 & 35 & 490 \\\hline 12 & 40 & 480 \\\hline 10 & 45 & 450 \\\hline 8 & 50 & 400 \\\hline 6 & 55 & 330 \\\hline 4 & 60 & 240 \\\hline 2 & 65 & 130 \\\hline 0 & 70 & 0 \\\hline\end{array}$ ​ -Refer to Table 17-4. What is the socially efficient quantity of the product?

If the members of an oligopoly could agree on a total quantity to produce and a price to charge, what quantity and price would they choose? Will this choice represent a Nash equilibrium?

Resale price maintenance prevents retailers from competing on price.

Table 17-9 Hanna and Alicia are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The following table shows the payoffs for this situation, where the higher a player's payoff number, the better off that player is. ​ ​ -Refer to Table 17-9. What is the Nash Equilibrium in this dorm room cleaning game?

Table 17-13 Suppose that Robert and Howard own the only two movie studios in California. Each producer must choose between a low budget and a high budget strategy for his next film. The economic profit from each strategy is indicated in the table below: Howard Low budget High budget -Refer to Table 17-13. Does Howard have a dominant strategy? If so, describe it.

As the number of firms in a cartel increases, the easier it is to enforce the cartel agreement. ​

Suppose the market for home-grown peppers in the town of Smallville is comprised of two farmers. Explain why they might try to collude.

In cartels, the reason that the monopoly output is unstable is due to the factors that are present in a prisoner's dilemma. ​

Which of the controversial business practices, resale price maintenance, predatory pricing, or tying, was a part of a long-running antitrust lawsuit against Microsoft and why?

Table 17-6 Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits (in millions of dollars) of the two home-improvement stores are shown in the following figure. ​ -Refer to Table 17-6. Pursuing its own best interest, HomeMax will

In the prisoners' dilemma game, self-interest leads

Table 17-7 Two companies, Wonka and Gekko, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits (in millions of dollars) for the two companies. -Refer to Table 17-7. Which of the following statements is correct?