Exam 16: Business Strategy

When an oligopoly grows very large, the:

Table 16-4 Consider the following Duopoly game. -Refer to Table 16-4. If both firms follow a dominant strategy, firm A's profits (losses) will be:

Table 16-7 Consider two countries, Eudora and the Inhabit, that are engaged in an arms race. The question each country must face is whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The table shows the possible outcomes for each decision combination. -Refer to Table 16-7. If Inhabit chooses to arm, the country of Eudora will:

When oligopolists cooperate, they end up producing a total quantity that is closer to the social optimum.

The theory of oligopoly provides another reason that free-trade can benefit all countries for which of the following reasons? (i) as the number of firms within a given market increases, the price of the good falls (ii) increased competition leads to lower deadweight losses (iii) profit increases directly with competition for oligopoly firms

The game that oligopolists play in trying to reach the monopoly outcome is similar to the game that the two prisoners play in the prisoners' dilemma.

Table 16.6 Two firms share a common fishery. One strategy available to the firms is to fish sustainably. This maintains a healthy breeding population of fish, and keeps the price of fish relatively high. The other strategy is to overfish. This reduces the breeding population and fish prices tend to fall. The game is represented in the following table. -Refer to Table 16-6. If firm A uses its dominant strategy, its profit at the Nash Equilibrium will be:

Oligopolies would like to act like a:

Suppose a firm makes a product whose price decreases as the output increases. The firm is in a market with many other firms. It is most likely that the firm:

Arming a country is a dominant strategy for each country is in an arms race.

The only case where profit-maximising production decisions by firms will drive price to equal marginal cost are when:

It is sometimes possible to achieve cooperation in repeated games by threatening to punish defectors.

Self-interest usually dictates what kind of outcome for the players in a prisoners' dilemma game?

Describe the source of tension between cooperation and self-interest in a market characterised by oligopoly. Use an example of an actual cartel arrangement to demonstrate why this tension creates instability in cartels.

The typical firm in the economy:

A cartel is a group of firms that act in unison.

Oligopolies can end up looking like competitive firms if the number of firms is:

As the number of firms in an oligopoly grows larger, what happens to the quantity produced? (i) it approaches the socially optimal level (ii) it increases (iii) it decreases

During the 1990s, the members of OPEC operated independently from one another, causing the world market for crude oil to become close to a(n):

Two fishing firms share a common fishery. One strategy available to the firms is to fish sustainably. This maintains a healthy breeding population of fish, and keeps the price of fish relatively high. The other strategy is to overfish. This reduces the breeding population and fish prices tend to fall. The game is represented in the following table: Explain what the Nash equilibrium for this game is and identify the profit each player gets at this solution. Is the Nash equilibrium the best social outcome for this problem?