Exam 14: Oligopoly

Use the following to answer questions: Figure: Payoff Matrix for Gehrig and Gabriel -(Figure: Payoff Matrix for Gehrig and Gabriel) The figure Payoff Matrix for Gehrig and Gabriel describes two people who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. If both follow a tit-for-tat strategy, equilibrium will be reached when Gehrig produces _____ figurines and Gabriel produces _____ figurines.

The government agency in the United States that reviews proposed mergers of firms in the same industry and prohibits mergers that it believes will reduce competition is the:

Use the following to answer questions: Figure: Payoff Matrix for Gehrig and Gabriel -(Figure: Payoff Matrix for Gehrig and Gabriel) The figure Payoff Matrix for Gehrig and Gabriel describes two people who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. The combined profits of the two are maximized if Gehrig produces _____ figurines and Gabriel produces _____ figurines.

A trust:

As a New York business owner who does a lot of flying, you are keenly aware of even small changes in airfare from New York to Chicago. You have flown this route long enough to know that each airline is essentially a perfect substitute for the others. You notice that every time the largest airline changes the price, smaller airlines follow, but the smaller airlines are always priced slightly below the fare of the largest airline. This industry could best be described as one with:

One of the earliest actions of antitrust policy was the breakup of:

Use the following to answer questions: Figure: Pricing Strategy in Cable TV Market II -(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. The noncooperative equilibrium in the cable TV market occurs when:

The breakup of Standard Oil in 1911 was one of the first applications of antitrust policy in the United States.

Until recently most other advanced countries did not have policies that prohibited price fixing.

Use the following to answer questions: -(Table: Demand for Solar Water Heaters) Look at the 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?

Oligopolistic firms often choose not to compete on price.

Gary's Gas and Frank's Fuel are the only two providers of gasoline in their small town. Gary summarizes his pricing strategy as, "I'll do to Frank what Frank did to me last time." This is an example of:

Use the following to answer questions: Figure: Pricing Strategy in Cable TV Market II -(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. Suppose that after one month, the cable providers follow a tit-for-tat strategy. Eventually they will achieve a tacit collusive equilibrium at which:

Use the following to answer questions: Scenario: Payoff Matrix for Firms X and Y The following payoff matrix depicts the profits for the only two firms in this oligopolistic industry. -(Scenario: Payoff Matrix for Firms X and Y) In the scenario Payoff Matrix for Firms X and Y, if firm X were to choose its dominant strategy, it would:

Antitrust policy refers to government:

The term imperfect competition is used to refer to both oligopoly and monopolistic competition.

The study of behavior in situations of interdependence is called:

Use the following to answer questions: -(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for 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, the market price of gadgets will be:

Which of the following scenarios best describes an oligopolistic industry?

Maximization of joint profits is most likely when firms are: