Exam 14: Oligopoly: Firms in Less Competitive Markets

Figure 14-8 -Refer to Figure 14-8 Use the decision tree to determine whether Microsoft should deter Toshiba from entering the market for electronic book readers (e-readers).Assume that each firm must earn a 20% return on investment to break even.Explain Microsoft's decision process.

Prisoner's dilemma games imply that cooperative behavior between two people or two firms always breaks down.But reality teaches us that people and firms often cooperate successfully to achieve their goals.Why do the results from prisoner's dilemma games fail to predict real-world results?

The prisoner's dilemma illustrates

The bargaining power of suppliers increases if

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?

A patent is a government-imposed entry barrier because

Table 14-8 Two rival oligopolists in the athletic supplements industry, the Power Fuel Company and the Brawny Juice Company, 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 De Beers Company blocked competition

In an oligopoly, firms can increase their market power by

As several eastern states began to legalize casino gambling, the revenues of casinos in Atlantic City began to ________ and their profits ________.

Which of the following is important in determining the extent of competition in an industry?

A large majority of the personal computers (PCs)in the United States use an operating system purchased from Microsoft.Microsoft's relationship with PC manufacturers is an example of which of Porter's competitive forces?

Which of the following is not part of an oligopolist's business strategy?

Table 14-3 Suppose OPEC has only two producers, Saudi Arabia and Nigeria.Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Nigeria.The payoff matrix in Table 14-3 shows the profits earned per day by each country."Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota. -Refer to Table 14-3.Which of the following statements is true?

Figure 14-5 Netflix (N)was one of the first companies to offer streaming video services and is still considered a leader in the industry.Spotify (S)offers a music streaming service and is considering entering the video streaming business.At this point, Netflix has to decide whether or not to lower its subscription price in order to deter Spotify's entry into the market.Figure 14-5 shows the decision tree for the Netflix-Spotify entry game. -Refer to Figure 14-5.If Netflix lowers its price, will this deter Spotify from setting up a streaming video service?

If the painting firms in a city sign a contract outlining a pricing plan, they are involved in

Consider a U-shaped long-run average cost curve that has a minimum efficient scale at 6,000 units of output.In this case, this industry would be

A reason why there is more competition among restaurants than among large discount department stores is that restaurants

The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example, lawyers and medical doctors), but the laws also result in