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Exam 17: Oligopoly

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Question 51

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The theory of oligopoly provides another reason that free trade can benefit all countries because

A) increased competition leads to larger deadweight losses.
B) as the number of firms within a given market increases, the price of the good decreases.
C) as the number of firms within a given market increases, the profit of each firm increases.
D) All of the above are correct.

E) A) and C)
F) A) and B)

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Question 52

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Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market?

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Because there are only a few firms in an...

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Question 53

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The simplest type of oligopoly is

Which strategy was the most successful in the prisoners' dilemma tournament?

Figure 17-5. Two companies, ABC and QRS, 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 17-5. Suppose the outcome of the game is one in which ABC's profit is $4 million and QRS's profit is $14 million. The most likely explanation for this outcome is that

Which of these situations produces the largest profits for oligopolists?

Table 17-20 Nadia and Maddie 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 payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie) . -Refer to Table 17-20. What is the Nash Equilibrium in this dorm room cleaning game?

Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output. If the two firms successfully reach and maintain the cooperative outcome of the game, then

In the case of oligopolistic markets, self-interest makes cooperation difficult and it often leads to an undesirable outcome for the firms that are involved.

Table 17-6 Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water are shown in the table below. -Refer to Table 17-6. The socially efficient level of water supplied to the market would be

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?

After initial success, the OPEC cartel saw the price of oil and the revenues of its members decline due, in part, to

Table 17-12 The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost. -Refer to Table 17-12. Suppose there are exactly two sellers of gasoline in Driveaway: Amogo and Spilmerica. If Amogo sells 150 gallons and Spilmerica sells 100 gallons, then

Any market that is served by an oligopoly is in effect served by a monopoly.

In a game, a dominant strategy is

In the U.S. government's 1998 suit against the Microsoft Corporation, a central issue was whether Microsoft should be allowed to integrate its Internet browser into its Windows operating system. Microsoft responded that

When strategic interactions are important to pricing and production decisions, a typical firm will

Table 17-1 Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below: 21. -Refer to Table 17-1. If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, how much profit will each of them earn?

The paradoxical nature of oligopoly can be demonstrated by the fact that, even though the monopoly outcome is best for the oligopolists,

Suppose three firms form a cartel and agree to charge a specific price for their output. Each individual firm has an incentive to maintain the agreement because the firm's individual profits will be the greatest under the cartel arrangement.