Exam 15: Oligopoly

A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is called a

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1945 and two of the competing banks have considered merging. Because the merger would raise the HHI by 155 points, the Federal Trade Commission would likely

Under Federal Trade Commission merger guidelines, an industry with a Herfindahl-Hirschman index (HHI) of 800 points is considered

Limit pricing refers to

A cartel is an agreement

Tying arrangements are always held to be illegal under U.S. antitrust law.

Which of the following is a defining characteristic of oligopoly?

What is meant by the term "exclusive dealing"? Give an example of an exclusive deal. When is it illegal?

In part, an antitrust laws

Nimbus, Inc., and Cleansweep, Inc., are the only producers of flying brooms. Each firm has two strategies: Spend 30,000 galleons a year on research and development (R&D) or spend nothing on R&D. If neither firm spends on R&D, Nimbus' economic profit is 80, 000 galleons and Cleansweep's economic profit is 40,000 galleons. If each firm conducts R&D, market shares are maintained, but each firm's profit is lower by the amount spent on R&D. If Nimbus conducts R&D and Cleansweep does not, Nimbus makes an economic profit of 120,000 galleons, while Cleansweep incurs an economic loss of 20,000 galleons. If Cleansweep conducts R&D and Nimbus does not, Cleansweep makes a profit of 60,000 galleons while Nimbus loses 10,000 galleons. a) Construct a payoff matrix for the game that Nimbus and Cleansweep must play. b) Find the Nash equilibrium. In the Nash equilibrium, what is each firm's equilibrium profit? c) What is the cooperative outcome? Would the firms make more economic profit if they collude to achieve the cooperative outcome?

In a prisoner's dilemma, the Nash equilibrium occurs where

A tit-for-tat strategy can be used in

The prisoners' dilemma describes a single-play game that features

A strategy called "limit pricing" sets the price

"The Clayton Act repealed the Sherman Act so that only the Clayton Act remains in force." Is the previous statement correct or incorrect?

The practice of the only seller in a market charging a price at the highest level that would still inflict a loss on a new entrant into the market is called

In game theory, a Nash equilibrium is the equilibrium that always yields the best result.

-The table above has the market demand schedule in an industry that has two firms in it. The marginal cost of this product is zero because these two firms have exclusive ownership of the resource and it does not cost any additional amount to produce additional units. a) If the firms cooperate with each other so that they operate as a monopoly, what price will they charge and what (total) output will they produce? b) If the firms cannot cooperate but instead behave as perfect competitors, what will be the price and the (total) output they produce?

If McDonald's, Wendy's, and Burger King agree with each other not to sell hamburgers for less than $3.95 apiece, all three could be found guilty of

The maximum total economic profit that can be made by colluding duopolists