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Exam 17: Oligopoly.

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Question 141

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Game theory is necessary for understanding

A) all market structures.
B) competition and oligopoly, but it is not necessary for understanding monopoly.
C) monopoly and oligopoly, but it is not necessary for understanding competition.
D) oligopoly, but it is not necessary for understanding monopoly or competition.

E) B) and D)
F) B) and C)

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Question 142

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What effect does the number of firms in an oligopoly have on the characteristics of the market?

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As the number of firms increas...

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Question 143

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When prisoners' dilemma games are repeated over and over,sometimes the threat of penalty causes both parties to cooperate.

The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members.

Table 17-17 This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B) . -Refer to Table 17-17.In this game,

If duopolists colluded but then stopped colluding,

OPEC is able to raise the price of its product by

The Sherman Antitrust Act states that if a person can prove that he was damaged by an illegal arrangement to restrain trade,he could sue and recover three times the damages he sustained.

Which of the following prohibits executives of competing firms from even talking about fixing prices?

Scenario 17-1. Assume that the countries of Irun and Urun are the only two producers of crude oil. Further assume that both countries have entered into an agreement to maintain certain production levels in order to maximize profits. In the world market for oil, the demand curve is downward sloping. -Refer to Scenario 17-1.If Irun fails to live up to the production agreement and overproduces,which of the following statements will be true of Urun's condition?

Figure 17-4. Two companies, Acme and Bilco, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-4.If the two companies make their pricing decisions independently,then it is likely that Acme will

Scenario 17-3. Consider two countries, Muria and Zenya, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The following table shows the possible outcomes for each decision combination. The numbers in each cell represent the country's ranking of the outcome (4 = best outcome, 1 = worst outcome) . -Refer to Scenario 17-3.Building new weapons is a dominant strategy for

Table 17-4. The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $200,000 (per year) and that the marginal cost of providing an additional subscription is always $80. -Refer to Table 17-4.Assume there are two profit-maximizing high-speed Internet service providers operating in this market.Further assume that they are not able to collude on the price and quantity of subscriptions to sell.How many subscriptions will be sold altogether when this market reaches a Nash equilibrium?

The Clayton Act

When an oligopoly market reaches a Nash equilibrium,

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market,we have

As the number of firms in an oligopoly increases,the price approaches

Table 17-14 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B) . -Refer to Table 17-14.If both players choose their best strategies,player A will earn a payoff of

Table 17-13 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 of the two home-improvement stores are shown in the table below. -Refer to Table 17-13.Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit.They should both agree to

Explain the practice of resale price maintenance and discuss why it is controversial.