Exam 14: Oligopoly: Firms in Less Competitive Markets

Ocean Spray is considered to be an oligopoly firm because, until the 1990s, it faced little competition in the market for fresh and frozen cranberries. Why?

An oligopolistic industry is characterized by a few large firms acting independently.

Figure 14-3 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 14.3 shows the decision tree for the Rainbow Writer-Odeon bargaining game. -Refer to Figure 14-3. How will Rainbow Writer respond to Odeon's two possible offers?

Which government agency publishes four-firm concentration ratios?

A situation in which each firm chooses the best strategy given the strategies chosen by other firms is called a

When large firms in oligopolies cut their prices

A characteristic found only in oligopolies is

Which of the following is not among Porter's competitive forces?

Figure 14-2 The government of a developing country plans to award two firms, Gigacom and Xenophone, the exclusive rights to share the market for high speed internet service. Gigacom and Xenophone can both provide the service either via television cable lines or via direct subscriber line (DSL). Suppose the government is considering a proposal to delay one firm's entry into the market on the grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision tree for this game. -Refer to Figure 14-2. Now suppose that the government delays Xenophone's entry and Gigacom moves first, what is the likely outcome in the market?

Table 14-8 Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts. -Refer to Table 14-8. If Zuma selects a high price, what is Wide Awake's best strategy and what will Wide Awake earn as a result of this strategy?

All of the following are characteristics of game theory except

Most economists are concerned about entry barriers. Why is this so important to them?

What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

An example of a supplier that used its bargaining power to charge high prices to its customers is

Which of the following is not a characteristic of an oligopoly?

How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?

Which of the following is not a barrier to entry?

Figure 14-3 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 14.3 shows the decision tree for the Rainbow Writer-Odeon bargaining game. -Refer to Figure 14-3. What is the equilibrium outcome in this game and is this a subgame-perfect equilibrium?

Table 14-5 Martin and Lewis each run one of the two bingo parlors in Schenectady. Both consider offering free rides to and from the parlors. Table 14-5 shows the payoff matrix containing the expected weekly profits for each bingo parlor. -Refer to Table 14-5. What is the Nash equilibrium in this game?

The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.