Exam 14: Oligopoly: Firms in Less Competitive Markets

Which of the following is not an example of a government-imposed entry barrier?

The larger the number of firms in an industry,

Explain why selling output at a price below that at which marginal revenue equals marginal cost (MR = MC)might serve to deter entry of a potential competitor.

An equilibrium in a game in which players pursue their own self-interest is called

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

Table 14-6 There are two custom carport manufacturers in Louisiana, Under Cover (U)and Made for Shade (M). Under Cover has been in the market for a long time and must now compete with newcomer, Made for Shade. Suppose that Under Cover believes that Made for Shade will match any price it sets. Use Table 14-6 to answer the following question and assume throughout that Under Cover believes that Made for Shade will match any price it sets. -Refer to Table 14-6.What price will Under Cover charge and what profit does Under Cover expect to make?

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 the firms cooperate, what prices will they select?

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

Decision trees can only be used to analyze sequential games.

Monopolistic competition differs from oligopoly in that in monopolistic competition, firms act independently while in oligopoly, firms act interdependently.

Consider two craft bourbons distilled in Brooklyn, New York: Kings County and Stillhouse.If the distilleries advertise, they can both sell more bourbon and increase their revenue.However, the cost of advertising more than offsets the increased revenue so that each distillery ends up with a lower profit than if they do not advertise.On the other hand, if only one advertises, that distillery increases its market share and also its profit. a.Construct a payoff matrix using the following hypothetical information: If neither distillery advertises: each earns a profit of $500,000 per year.If both advertise: each earns a profit of $250,000 per year.If one advertises and the other does not: the distillery that advertises earns a profit of $750.000 and the distillery that does not advertise earns a profit of $125,000. b.If the two distilleries agree to coordinate their strategies, what is the outcome?

Selling baked goods out of your home or apartment is illegal in Wisconsin and New Jersey, but in recent years, California, Minnesota, and Texas have repealed their laws banning the sale of home-baked goods.The repeal of these laws will cause the revenues of commercial bakeries in these three states to ________ and their profits to ________.

Figure 14-1 Assume that Lexus (L)is the first automobile company to produce a luxury class hybrid automobile and is the only such company for the past four years. BMW is now considering producing its own luxury hybrid automobile and Lexus must decide whether or not to lower the price of its luxury hybrid to counter BMW's entry into the luxury hybrid niche. -Refer to Figure 14-1.Should Lexus lower its price in order to deter BMW's entry into the luxury hybrid automobile market?

The equilibrium in the prisoner's dilemma is a Nash equilibrium.

Table 14-4 Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 14-4 shows the payoff matrix for this game. -Refer to Table 14-4.If Alpha assumes that Beta would offer a student discount, what should it do?

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

A set of actions that a firm takes to achieve a goal is the definition of a

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

For years, economists believed that market structure explained the ability of some firms to earn economic profits.Today, economists and business strategists put greater emphasis on

Sequential games are used to analyze