Exam 16: Oligopoly

Table 16-18 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul). -Refer to Table 16-18.What is Paul's dominant strategy?

In the case of oligopoly markets,self-interest prevents cooperation and leads to an inferior outcome for the firms that are involved.

The manufacturer of Bozz Radios sells radios to retail stores for $500 each,and it requires the retail stores to charge customers $550 per radio.Any retailer that charges less than $550 would violate its contract with Bozz Radios.What do economists call this business practice?

Table 16-16 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2). -Refer to Table 16-16.What is grocery store 1's dominant strategy?

Consider the diagram below which shows the market demand curve for a particular product.Suppose this market is served by two duopolists who each face the marginal cost curve shown in the diagram.The marginal revenue curve that a monopolist would face in this market is also shown.Which of the following statements is true?

Scenario 16-5 Assume that a local bank sells two services, checking accounts and ATM card services. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. Assume that the bank can provide each of these services at zero marginal cost. -Refer to Scenario 16-5.If the bank is unable to use tying,what is the profit-maximizing price to charge for unlimited use of an ATM card?

Although the practice of predatory pricing is a common claim in antitrust suits,some economists are skeptical of this argument because they believe

Table 16-7 Suppose the countries of Xania and Pluntia share the world supply of water. Suppose that the marginal cost of bottling water is a constant $4 per gallon, and the demand for water is described by the following schedule: -Refer to Table 16-7.If there were many suppliers of bottled water,what would be the price and quantity?

An oligopolist will increase production if the output effect is

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for four industries. -Refer to Table 16-2.Which industry has the highest concentration ratio?

If nations such as Germany,Japan,and the United States prohibited international trade in automobiles,a likely effect would be that

Which of the following will weaken OPEC's effect on the world price of oil? (i) Member countries abide by the regulatory policy set forth under the original collusive agreement. (ii) Member countries increase their own production. (iii) Member countries set their level of production in order to capture a larger share of the total profit available.

A tit-for-tat strategy starts out

OPEC is able to raise the price of its product by

One characteristic of an oligopoly market structure is:

For cartels,as the number of firms (members of the cartel)increases,

The Sherman Antitrust Act was passed in

Table 16-13 -Refer to Table 16-13.This table shows a game played between two players,A and B.The payoffs in the table are shown as (Payoff to A,Payoff to B).Which of the following outcomes represents a Nash equilibrium in the game?

Oligopolies can end up looking like competitive markets if the number of firms is

The prisoners' dilemma game