Exam 15: Oligopoly

Firm A -Firms A and B can conduct research and development (R&D) or not conduct it. R&D is costly but can increase the quality of the product and increase sales. The payoff matrix is the economic profits of the two firms and is given above, where the numbers are millions of dollars. A's best strategy is to

"A Nash equilibrium occurs when both parties to a game end up worse off as a result of the decisions that are made." Is the previous definition of a Nash equilibrium correct or incorrect?

In a Nash equilibrium, each player takes the best possible action given the actions of the other players.

Which of the following is TRUE regarding a collusive agreement? I. It is illegal in the United States. II) Two or more producers agree to restrict output or raise prices. III) Firms' profits are never maximized under this sort of agreement.

Two firms make most of the consumer alkaline batteries in the country: Duracell and Energizer. The market for batteries is most likely

In the market for batteries, the three largest firms earn 90% of the total revenue and there are 35 firms in the industry. This industry is best described as

The outcome of a prisoners' dilemma game with a Nash equilibrium is that ________.

Which of the following is a distinguishing characteristic of oligopoly?

A market with one or a small number of firms but no barriers to entry is known as

In ________ market structure, a firm's output depends ________.

Student 1 -Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table. Student 1 should

A contestable market is a market in which there are one or a few firms and entry into the market is not costly.

Game theory is used to explain firms' decisions in

Dr. Smith -Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements CORRECTLY describes Dr. Jones' strategy given what Dr. Smith may do?

The beginning of antitrust law is found in the

Once a cartel determines the profit-maximizing price

Russia and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel for natural gas. The two strategies these countries face are to comply with the cartel agreement or to cheat on the cartel agreement. If both countries comply, the economic profit for each will be $140 million. If one country cheats, that country earns $200 million in economic profit and the other country will have an economic loss of $10 million. If all countries cheat, they break even. What is the outcome of this game if it is only played once?

What is the real dilemma facing the prisoners in the prisoners' dilemma game?

What is the best outcome for society: when firms in an oligopoly enter into a collusive agreement to operate as a monopoly or when they act as perfect competitors? Briefly explain your answer.

If Sony required all its retailers not to sell televisions from other companies, Sony would be engaging in what kind of activity? Is Sony's requirement legal or does it violate the Clayton Act?