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Exam 17: Oligopoly

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Question 251

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We must be knowledgeable of how people behave in strategic situations if we are to understand

A) perfectly competitive markets.
B) monopolistically competitive markets.
C) oligopolistic markets.
D) All of the above are correct.

E) None of the above
F) A) and C)

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Question 252

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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 Maddie's dominant strategy?

A) Maddie has no dominant strategy.
B) Maddie should always choose Clean.
C) Maddie should always choose Don't Clean.
D) Maddie has two dominant strategies, Clean and Don't Clean, depending on the choice Nadia makes.

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

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Question 253

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Table 17-19 Consider a small town that has two grocery stores from which residents can choose to buy a loaf of bread. The store owners each must make a decision to set a high bread price or a low bread price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2) . -Refer to Table 17-19. If grocery store 1 sets a high price, what price should grocery store 2 set? And what will grocery store 2's payoff equal?

Oligopolies can end up looking like competitive markets if the number of firms is

Government regulators might suspect a firm of engaging in predatory pricing if it charges prices that seem to be too __________.

Chrissy and Marvin are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $10,000. If neither of them advertise, each will earn a profit of $20,000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $30,000 and the other will earn $14,000. To earn the highest profit, Chrissy

Why do economists use game theory to study the actions of firms in oligopoly markets but not in other markets?

Table 17-37​ Two restaurants with a focus on Mexican dining operate in Texama. Both Mitch's Mexican and Tim's Tacos need to decide whether to add Zesty Queso or Fresh Guacamole to their menus. The circumstances are that each firm wants to add only one of the two choices on their menu. Below you will find the profits for the stores, shown as: (1) the payoff to Mitch; (2) the payoff to Tim. ​ -Refer to Table 17-37. Based upon the information from the table, you can conclude that this game is an example of ​

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. Which of the following statements about this game is true?

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,

Briefly describe the practice of resale price maintenance.

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

Figure 17-4. Aaron and Ed are roommates. After a big snowstorm, their driveway needs to be shoveled. Each person has to decide whether to take part in shoveling the driveway. At the end of the day, either the driveway will be shoveled (if one or both roommates take part in shoveling) , or it will remain unshoveled (if neither roommate shovels) . With happiness measured on a scale of 1 (very unhappy) to 10 (very happy) , the possible outcomes are as follows: -Refer to Figure 17-4. In pursuing his own self-interest, Ed will

Table 17-10 The table shows the demand schedule for a particular product. -Refer to Table 17-10. Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit, then what price will the cartel set in this market?

As the number of sellers in an oligopoly becomes very large,

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. As long as the combined level of output is less than the Nash equilibrium level, both Irun and Urun have the individual incentive to

In which of the following markets are strategic interactions among firms most likely to occur?

Figure 17-1 -Refer to Figure 17-1. Suppose this market is served by two firms who each face the marginal cost curve shown in the diagram and have zero fixed cost. The marginal revenue curve that a monopolist would face in this market is also shown. If the firms are able to collude successfully, each firm should earn a profit equal to

Table 17-25 There are just two producers of a certain product. Each is considering offering promotional discounts. -Refer to Table 17-25. The dominant strategy

Resale price maintenance prevents retailers from competing on price.