Exam 15: Oligopoly

In a contestable market the Herfindahl-Hirschman Index is ________ and the market behaves as if it is ________.

Gateway -Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium,

-The table above has the market demand schedule in an industry that has two firms in it. The marginal cost of this product is zero because these two firms have exclusive ownership of the resource and it does not cost any additional amount to produce additional units. a) If the firms cooperate with each other so that they operate as a monopoly, what price will they charge and what (total) output will they produce? b) If the firms cannot cooperate but instead behave as perfect competitors, what will be the price and the (total) output they produce?

Dr. Smith -Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements correctly categorizes the Nash equilibrium for the game?

In a duopoly with a collusive agreement and in a one-time only game, a firm's profit is largest if it ________ the agreement and if the other firm ________ the agreement.

Explain how the courts have ruled on price fixing.

In the market for batteries, the four largest firms earn 90% of the total revenue and there are 35 firms in the industry. This industry is best described as

Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

In the prisoners' dilemma game, when each player takes the best possible action given the action of the other player, ________.

If price fixing by competitors is necessary because without it a firm will go bankrupt, is the price fixing legal?

Price wars are

An industry is made up of 8 firms with the following percent market shares: 29, 20, 11, 10, 9, 8, 7, 6. The firms with 8 and 7 percent market share are proposing to merge. What is the new Herfindahl-Hirschman index if the merger takes place?

A firm might be tempted to cheat on a collusive price-fixing agreement by setting a ________ price and producing ________ than agreed upon.

Game theory is used to explain firms' decisions in

Oscar -Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above gives the economic profit that each firm can make. If Felix cheats on the agreement but Oscar complies, Felix makes an economic profit of ________ and Oscar makes an economic profit of ________.

Limit pricing in a contestable market sets the price at the highest level that ________.

Of the following market structures, which has the fewest number of firms competing against each other?

-A market has ten firms, whose market shares are given in the table above. a) If firms I and J wanted to merge, according to the Department of Justice guidelines, would the Department of Justice challenge the merger? b) If firms A and B wanted to merge, according to the Department of Justice guidelines, would the Department of Justice challenge the merger?

There are two firms that compete against each other and each needs to decide if they will undertake research and development to improve their product. The payoffs are as follows: If Firm 1 does undertake R&D then Firm 2 will earn $25 million if they also do R&D or $50 million if not If Firm 1 does not undertake R&D then Firm 2 will earn $2 million if they do R&D or $0 million if not If Firm 2 does undertake R&D then Firm 1 will earn $10 million if they also do R&D or $20 million if not If Firm 2 does not undertake R&D then Firm 1 will earn $2 million if they do R&D or $0 million if not Regarding this game, which of the following is true?

Suppose two firms, FastNet and SmartCast are the only fast Internet providers in a city. They have identical costs and one firm's service is a perfect substitute for the other's. The industry is a natural duopoly. Suppose that FastNet and SmartCast collude and agree to share the market equally. -In the scenario above, if both firms cheat on the agreement, producing more than the agreed amount, then: