Exam 14: Oligopoly: Firms in Less Competitive Markets

According to an article in the Wall Street Journal, "The big car makers are pushing a wide array of new technology into production, responding to relentless competitive pressure, Rising energy prices and consumer demand for better safety. Source: Joseph B. White, "Ford, GM Eye Shift in Buying Habits," Wall Street Journal, May 22, 2006. Which of Porter's competitive forces does this statement allude to?

According to Porter's Five Competitive Forces Model, similar products produced by different firms within the industry affects a firm's ability to raise prices far more than substitutable products produced outside the industry.

Collusion occurs when

By the 21st century, few people purchased printed encyclopedias. Which of the following competitive forces best explains this?

Of the following industries, which has the highest four-firm concentration ratio?

Which of the following is not one of the five competitive forces?

In an oligopoly, minimum efficient scale is likely to occur at a level of output that is a large fraction of industry sales.

An equilibrium in which each player chooses its best strategy given the strategies chosen by the other players is called a Nash equilibrium.

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

Figure 14-4 Rainbow Writer (RW) is a small online company selling a highly rated software package for engraving words onto objects produced by 3D printers. The firm currently earns a profit of $2 million per year selling its package exclusively on its Website. Odeon, the producer of the most popular 3D printers has expressed interest in bundling Rainbow Writer's product with its printers. Odeon expects that bundling would further boost its sales and allow it to sell its printers at a higher price, thus raising its profits beyond its current profit of $12 million. Figure 14.4 shows the decision tree for the Rainbow Writer-Odeon bargaining game. -Refer to Figure 14-4. What is the equilibrium outcome in this game and is this a subgame-perfect equilibrium?

In a sequential game, one firm will act first and then other firms will respond.

Which of the following is not a reason why government officials are willing to impose entry barriers?

What is a prisoner's dilemma?

Figure 14-8 -Refer to Figure 14-8 Use the decision tree to determine whether Microsoft should deter Toshiba from entering the market for ergonomic wireless keyboards. Assume that each firm must earn a 20% return on investment to break even. Explain Microsoft's decision process.

The breakfast cereal industry has a four-firm concentration ratio of 80 percent. Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?

On November 7, 1996, the Distilled Spirits Council of the United States decided to end its voluntary ban on television and radio liquor advertisement. The ban on hard liquor advertising had been in effect since 1936 for radio and 1948 for television. Assuming that advertising is a prisoner's dilemma, and that if one company advertises, its competitors will also choose to spend money to advertise, did the lifting of this ban likely increase or decrease the profits of hard liquor companies? Briefly explain.

A consequence of the quota that has been imposed on the importation of sugar into the United States is

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond. This is evidence of

Which of the following statements is generally true?

Which of the following statements about the prisoner's dilemma is false?