Exam 14: Oligopoly: Firms in Less Competitive Markets

In economics, the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms is called

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

When large firms in oligopoly markets cut their prices

Which of the following is not a characteristic of oligopoly?

A four-firm concentration ratio measures

In the 1930s and 1940s, the Technicolor company was able to leverage its bargaining power over the movie industry because Technicolor was the sole producer of cameras and films needed to produce color films.

Since 1972, the world price of oil has been largely determined by OPEC, which controls about 75 percent of the world's proven oil reserves.Since 1972 the price of oil has

Table 14-9 -Refer to Table 14-9.Saudi Arabia and Yemen must decide how much oil to produce.Since the demand for oil is inelastic, relatively low production rates drive up prices and profits.Saudi Arabia, the world's largest and lowest-cost producer, is able to influence market price; it has an incentive to keep output low.Yemen, on the other hand, is a relatively high-cost producer with much smaller reserves.Use the payoff matrix in Table 14-9 to answer the following questions. a.What is the dominant strategy for Saudi Arabia? b.What is the dominant strategy for Yemen? c.What is the Nash equilibrium?

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

In recent years, online bookseller Amazon.com has lowered its profits by offering some of its customers free shipping and building more warehouses to hold its inventories.Which of the following explains Amazon.com's actions?

A cooperative equilibrium results when firms

Figure 14-9 -Refer to Figure 14-9.Uniguest, Inc.is a company that provides PCs with internet access and touch-sensitive screens to hotels.Suppose the Hard Rock Hotel and Casino in Las Vegas informs Uniguest that it is considering installing these systems in its hotel rooms.The Hard Rock expects to be able to charge higher prices for these rooms if it installs Uniguest's systems in its rooms.The two companies begin bargaining over what price the Hard Rock will pay Uniguest for its systems, and the decision tree shown above illustrates this bargaining game.Note that the profit figures listed in the decision tree are additional profits for the Hard Rock and total profits for Uniguest. a.Suppose the Hard Rock offers Uniguest $1,200 per system.Will Uniguest accept or reject this offer? Why? b.Suppose the Hard Rock offers Uniguest $800 per system.Will Uniguest accept or reject this offer? Why? c.Suppose Uniguest attempts to obtain a favorable outcome from the bargaining by telling the Hard Rock it will reject an $800-per-system offer.If the Hard Rock does not believe the threat is credible, what will it do? Why? What will Uniguest do? Why? d.Is there a subgame-perfect equilibrium in this situation? Explain.

What is the incentive for a firm to join a cartel?

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

Which of the following is not necessarily a consequence of occupational licensing laws?

The music streaming industry, where a firm's profitability depends on its interactions with other firms, is an example of

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?

What is the difference between explicit collusion and implicit collusion?

Table 14-1 Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow.Each firm must decide on whether to increase its advertising spending to compete for customers.Table 14-1 shows the payoff matrix for this advertising game. -Refer to Table 14-1.Let's suppose the game starts with each firm adhering to its original budget so that Godrickporter earns a profit of $6,000 and Star Connections earns a profit of $12,000.Is there an incentive for any one firm to increase its advertising budget?