Exam 17: Business Strategy and Oligopoly

According to the information provided, which of the following are problems with grading students relative to their classmates? (i) it creates an incentive to cheat on the exams (ii) as long as at least one student cheats, it penalises all those who are unwilling to cheat (iii) it forces students to follow a sub-dominant strategy

When firms are faced with making strategic choices in order to maximise profit, economists typically use:

Illegal cartel agreements are:

If duopolists individually pursue their own self-interest when deciding how much to produce, the price they are able to charge for their product will be less than the monopoly price.

In a two-person repeated game, a tit-for-tat strategy starts with:

If the output effect is larger than the price effect, an oligopolist will decrease production.

According to the information provided, if Big Petro Inc.were to drill a second well and Gargantuan Gas also drilled a second well, what would Big Petro Inc's profit be?

If firms meet to coordinate their prices or their output levels, this is known as collusion.

The only case where profit-maximising production decisions by firms will drive price to equal marginal cost are when:

Table 16-1 The table below shows the total demand for viewing a rare penguin species at a local reserve.Ecotour companies have to build discreet viewing hides for tourists to view the penguins.Each ecotour company has to pay a fixed fee of $5000 for the right to build on the reserve.Assume that hides can be supplied to tourists at zero marginal cost.Tickets are sold to tourists to use the viewing hides. Quantity (Visits) Price(\ ticket) 0 48 2000 36 4000 24 6000 12 8000 8 10000 4 12000 0 Quantity (Visits) Price(\ ticket) Revenue 0 12 0 1000 10 10 2000 8 16 3000 6 18 4000 4 16 5000 2 10 6000 0 0 Any firm can change tickets by steps of 500 only.Any 500 step of quantity is assumed to be sold at the midpoint of the two prices (eg.3500 tickets would be sold for $5) -Refer to Table 16-1.Assume that there are two profit-maximising ecotourist companies operating in this market.Further assume that they are not able to collude on the price and quantity of tickets they sell.What price will the tickets be sold at when this market reaches a Nash equilibrium?

While on holiday in Berserkistan, you are arrested and accused of spying for Australia.You are, of course, innocent.Your captors inform you that if you confess, you will receive a sentence of two years while your co-conspirator (whom you have never heard of) will receive a sentence of 20 years.If you both confess, you will each receive a sentence of three years.You are also told that your co-conspirator is being offered the same option.You suspect that there is not enough evidence to convict you unless your alleged co-conspirator confesses.If you are risk-averse, what should you choose to do?

If identical products are sold by firms participating in a market, the market is which of the following? (i) perfectly competitive (ii) an oligopoly (iii) monopolistically competitive

In the prisoner's dilemma game, the dominant strategy is for each player to not confess.

The standard price for monopoly firms is a price that:

Even when allowed to collude, firms in an oligopoly will choose to cheat on their agreements with the rest of the cartel.Why?

The typical firm in the economy:

A deadweight loss to society always occurs in a market when the price is higher than the marginal cost.

According to the information provided, if Irun fails to live up to the production agreement and overproduces, which of the following statements will be true of Urun's condition?

Oligopolies can end up looking like competitive firms if the number of firms is large and they do not cooperate.

OPEC can be classified as which of the following? (i) a group whose concern is to control production levels of oil (ii) a group of oligopolists (iii) a cartel