Exam 15: Oligopoly

If both firms in a duopoly cheat on a collusive agreement, the price ________ and both firms are ________.

Two duopoly firms form a cartel. They decide to collude and fix the price of their good. Each individual firm will earn the highest profit if

The EU's antitrust chief in November 2008 fined car glass producers Asahi, Pilkington, Saint-Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price-fixing, the largest sum ever levied by the EU for a cartel. What is the reason why Asahi, Pilkington, Saint-Gobain and Soliver would price fix?

Antitrust law is law that

Kellogg's and General Mills are two of the dominant breakfast cereal manufactures in the U.S. Each firm can either sign or not sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box. If both companies sign an athlete, they will each make $5 million in economic profit. If only firm signs, they earn $8 million in economic profit and the other firm incurs an economic loss of $1 million. If neither firm signs, they break even. Which of the following pairs of payoffs would NOT appear together in a square of the payoff matrix?

In 2008, a former Intel engineer has been charged with stealing trade secrets worth $1 billion. Intel owns 90 percent of the worldwide market for microprocessors, AMD has the rest. Conducting R&D is very expensive so suppose that each of these firms can either steal R&D or develop their own R&D. If both firms develop their own R&D, economic profit will be $50 million each. If one company steals R&D, that firm earns $100 million in economic profit while the other firm earns $10 million. If both firms steal R&D, each firm breaks even. What is the outcome of this game?

A duopoly occurs when ________.

One difference between oligopoly and monopolistic competition is that

A monopolistically competitive firm is like an oligopolistic firm insofar as

Two firms, Alpha and Beta, produce identical computer hard drives. They have identical costs, and the hard drives they produce are identical. The industry is a natural duopoly. Alpha and Beta enter into a collusive agreement, according to which they split the market equally. If both firms cheat on the agreement so the market is the same as a competitive market

As the Federal Trade Commission currently interprets the Herfindahl-Hirschman index (HHI), an industry is considered to be moderately concentrated if the HHI value is

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 2175 and two of the competing banks have considered merging. Because the merger would raise the HHI by 25 points, the Federal Trade Commission would likely

Of the following, the best example of firm that might operate in a contestable market is a

When a cartel maximizes its profit,

If firms in an industry make output decisions that are partially based on the price and output decisions of their competitors, then these firms are in ________ market have ________ with the other firms in the market.

What is a natural oligopoly? How does it arise? Give an example.

A cartel usually has a collusive agreement to

OPEC, the Organization of Petroleum Exporting Countries, was formed in Baghdad in 1960. Since its formation, this cartel has suffered from a major problem with respect to the quota (limit) of output it assigns each member nation. What is OPEC's goal and what sort of quota do you think the cartel assigns? How and why do nations cheat on their quota? What happens when a nation cheats on its quota?

A group of firms that has entered into a collusive agreement to restrict output and increase prices and profits is called

The maximum economic profit that can be made by a duopoly that colludes is equal to the ________.