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Exam 16: Oligopoly

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Question 41

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To increase their individual profits,members of a cartel have an incentive to

A) charge a higher price than the other members of the cartel.
B) increase production above the level agreed upon.
C) ignore the choices made by the other firms and act as a monopolist.
D) charge the same price a monopolist would charge.

E) A) and C)
F) A) and D)

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Question 42

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Table 16-18 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) . -Refer to Table 16-18.How many Nash equilibria are there in this Chicken game?

A) 0
B) 1
C) 2
D) 3

E) A) and C)
F) A) and D)

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Question 43

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Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.What is the concentration ratio in Industry C?

Hot-dog vendors on the beach fail to cooperate with one another on the quantity of hot-dogs they should sell to earn monopoly profits.A consequence of their failure is that,relative to the outcome the vendors would like, (i) the quantity of hot dogs supplied is closer to the socially optimal level. (ii) the price of hot dogs is closer to marginal cost. (iii) the hot-dog market at the beach is less competitive.

Table 16-5 -Refer to Table 16-5.This table shows the demand schedule for a particular product.Suppose the market for this product is served by two firms who each chooses its output independently.If the marginal cost to produce this product is $0,what is the Nash equilibrium production level for each firm?

Table 16-19 Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The annual economic profit from each strategy is indicated in the table. The profits are shown as (Matt, Brian) in each cell. -Refer to Table 16-19.Which of the following statements is correct?

In a competitive market,strategic interactions among the firms are not important.

Table 16-6 -Refer to Table 16-6.This table shows the demand schedule for a particular product.Suppose that the marginal cost to produce this product is constant at $2 per unit and that the fixed cost of producing this product is $10.If the market is served by two duopolists who each,acting in their own self-interest,choose the Nash equilibrium level of production,how much profit will each firm earn?

The "arms race" is similar to which of the following economic scenarios?

Table 16-15 -Refer to Table 16-15.This table shows a game played between two firms,A and B.Each firm must decide how much output to produce.The profits for each firm are shown in the table as (Profit for A,Profit for B) .The Nash equilibrium in this game is

In a particular town,Metrovision and Cableview are the only two providers of cable TV service.Metrovision and Cableview constitute a

Table 16-16 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk 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 16-16.If grocery store 1 sets a high price,what price should grocery store 2 set? And what will grocery store 2's payoff equal?

Cartels are difficult to maintain because

Table 16-6 -Refer to Table 16-6.This table shows the demand schedule for a particular product.Suppose the market for this product is served by two duopolists 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 $2,what price will the cartel set in this market?

Table 16-18 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) . -Refer to Table 16-18.If Paul chooses Drive Straight,what will John choose to do and what will John's payoff equal?

The Clayton Act of 1914 allows those harmed by illegal arrangements to restrain trade to

Outline the purpose of antitrust laws.What do they accomplish?

An equilibrium in which each firm in an oligopoly maximizes profit,given the actions of its rivals,is called

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.What is the concentration ratio in Industry B?

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called