Exam 16: Business Strategy

A situation in which economic actors interacting with one another each choose their best strategy, given the strategies the others have chosen is called a(n):

If duopolists individually pursue their own self-interest when deciding how much to produce, the price they are able to charge for their product will be equal to the monopoly price.

Table 16-2 In the following duopoly game, the two firms can either set the price of their product high or low. If one firm's price is lower than the other, most of the market will buy from them. This will increase the low-price firm's profit at the expense of the other firm. The game is represented in the table below. -Refer to Table 16-2. If the two firms wanted to achieve the optimal level of profit they would:

If firms meet to coordinate their prices or their output levels, this is known as collusion.

Suppose an opal-mining firm is part of an oligopoly. It will have no profit incentive to increase the output of opals when the output effect is:

Identify the market in the following list where economic profit is driven to zero in the long run:

A deadweight loss to society always occurs in a market when the price is higher than the marginal cost.

It can be difficult for an oligopoly to maintain a cartel because:

Assume that the countries of Irun and Urun are the only two producers of crude oil. Further assume that both countries have entered into an agreement to maintain certain production levels in order to maximise profits. The world market for oil is represented by a downward-sloping demand curve. -Refer to the information provided. In a non-repetitive game, which of the following is the dominant strategy of Irun when production levels are in accordance with the collusive agreement?

When an oligopoly market is in Nash equilibrium a firm will choose its best pricing strategy, given the strategies that it observes other firms taking.

At Green Warren High School, Mr. Burns teaches history to the senior class. Mr. Burns takes medication that makes him drowsy. After he distributes an exam to the class, he always falls asleep at his desk. As a result, many of the students cheat on the exams in Mr. Burns' class. The students have never been caught cheating, and, to make things simple, assume that they never will. Mr. Burns also believes in competition among the students, and therefore he grades exams on a relative scale. In other words, students have the incentive to score better than their classmates, and scoring worse than their classmates will always lead to an inferior grade. -According to the information provided, even though Sam is an honest young man, he decides to cheat on the exam because he feels he is a victim of the prisoners' dilemma. Which of the following statements would support Sam's decision to cheat?

Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market. If they both advertise, they again split the market, but profits are lower, since each company must bear the cost of advertising. Yet, if one company advertises while the other does not, the one that advertises attracts customers from the other. -Refer to the information provided. In 1971, the federal passed a law that banned cigarette advertising on television. After the ban which of the following is most likely to have happened? (i) profits of cigarette companies rose (ii) the prisoners' dilemma for the two companies with respect to television advertising was solved (iii) profits of cigarette companies fell

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. The Nash equilibrium for this game is for:

There are two types of markets in which firms face some competition, yet are still able to have some control over the prices of their products. The names given to these market structures are:

Table 16-3 Imagine a small town in which only two residents, Robert and John, own wells that produce water for safe drinking. Each Saturday, Robert and John work together to decide how many litres of water to pump, bring the water to town, and sell it at whatever price the market will bear. To keep things simple, suppose that Robert and John can pump as much water as they want without cost; therefore, the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water are shown in the table. -Refer to Table 16-3. The socially efficient level of water supplied to the market would be:

Monopolistically competitive firms are typically characterised by:

Suppose a group of four opal-mining firms operate as an oligopoly. If there is an increase in output from one of the firms, then:

One key difference between an oligopoly market and a competitive market is that oligopolistic firms:

OPEC can be classified as which of the following? (i) a group whose concern is to control production levels of oil (ii) a group of oligopolists (iii) a cartel

Markets with only a few sellers, each offering a product similar or identical to the others, are typically referred to as: