Exam 14: Oligopoly

Use the following to answer question: Figure: Collusion -(Figure: Collusion)Use Figure: Collusion.The price charged by the industry with collusion is shown by:

If Delta offers free drinks and snacks on its flights and Southwest follows,they are engaging in price leadership.

Use the following to answer question: -(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil.The marginal cost of producing crude oil is zero.If the crude oil industry is a monopoly,the price of crude oil will be _____,the total quantity of crude oil produced by the monopoly will be _____ barrels,and the monopoly will earn revenue equal to _____.

Use the following to answer question: -(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets with no marginal cost or fixed cost.If these two producers formed a cartel and acted to maximize total industry profits,total industry profit would be:

Use the following to answer question: -(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil.Assume that the crude oil industry is a duopoly and the marginal cost and fixed cost of producing crude oil equal zero.Suppose that the two firms are maximizing industry profit and splitting the profit evenly.If both firms decide to cheat and produce 10 more barrels each,the price of crude oil will be:

Until 1890,trusts in which firms in an industry agreed to limit production and raise prices were legal in the United States.

Market power in the United States was often gained in the latter part of the nineteenth century by:

Suppose that each of the two firms in a duopoly has the independent choice of advertising or not advertising.If neither advertises,each gets $10 million in profit;if both advertise,their profits will be $5 million each;and if one advertises while the other does not,the advertiser gets profit of $15 million and the other gets profit of $2 million.According to game theory,the Nash equilibrium is that:

Use the following to answer question: Figure: Monopoly Profits in Duopoly -(Figure: Monopoly Profits in Oligopoly)Use Figure: Monopoly Profits in Duopoly.Firms in the duopoly industry illustrated in the figure have zero fixed costs.The market demand curve is D₂.If the two firms colluded to maximize their combined economic profits,they would set the market price at _____,and combined economic profits of the firms would be _____.

Use the following to answer question: Figure: Monopoly Profits in Duopoly -(Figure: Monopoly Profits in Duopoly)Use Figure: Monopoly Profits in Duopoly.If there were two firms in this industry,they could engage in _____ and reap monopoly profits.

For approximately the past 20 years,the European Union has enforced antitrust policies for its member countries.

Use the following to answer question: -(Table: Two Rival Gas Stations)Use Table: Two Rival Gas Stations.The table shows a payoff matrix for two gas stations in a small town.Each firm can set either a high price or a low price,and customers view these two firms as nearly perfect substitutes.Profits in each cell of the payoff matrix are given as (Swifty's profit,Speedy's profit).Which statement describes a dominant strategy?

Use the following to answer question: Figure: Monopoly Profits in Duopoly -(Figure: Monopoly Profits in Duopoly)Use Figure: Monopoly Profits in Duopoly.The figure shows how an industry consisting of two firms that face identical demand curves (D₁)can collude to increase profits.The market demand curve is D_2. If the firms collude to share the market demand equally,then each firm will act as if its demand curve is given by:

Use the following to answer question: -(Table: Demand for Solar Water Heaters)Use Table: Demand for Solar Water Heaters.The marginal cost of producing solar water heaters is zero,and only two firms,Rheem and Calefi,produce them.Suppose they agree to produce only 25 water heaters each.If Rheem cheats on the agreement and produces 30 water heaters,what is the price effect for Rheem?

Tacit collusion is relatively easy for oligopolists if:

_____ is the unwritten or unspoken agreement through which firms limit _____.

Oligopoly firms that produce only cement are less likely to collude than firms in a cell phone oligopoly.

Airlines are prone to price wars because:

The FIRST law designed to curb monopoly power in the United States was the _____ Act.

Use the following to answer question: -(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets with no marginal cost or fixed cost.Suppose that these two producers have formed a cartel,agreed to split production of output evenly,and are maximizing total industry profits.If Margaret decides to cheat on the agreement and sell 100 more gadgets,Margaret's price effect will be a(n)_____ in profit of _____.