Exam 17: Oligopoly

Table 17-19.The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other.John and Paul have a common interest to avoid crashing into each other,but they also have a personal,competing interest to not turn first to demonstrate their courage to those observing the contest.The payoff table for this situation is provided below.The payoffs are shown as (John,Paul). -Refer to Table 17-19.If John chooses Turn,what will Paul choose to do and what will Paul's payoff equal?

For cartels,as the number of firms (members of the cartel)increases,

Table 17-9 Two cigarette manufacturers (Firm A and Firm B)are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking.Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses).State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study.Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states. -Refer to Table 17-9.If both firms follow a dominant strategy,Firm A's profits (losses)will be

Table 17-10 Each year the United States considers renewal of Most Favored Nation (MFN)trading status with Farland (a mythical nation).Historically,legislators have made threats of not renewing MFN status because of human rights abuses in Farland.The non-renewal of MFN trading status is likely to involve some retaliatory measures by Farland.The payoff table below shows the potential economic gains associated with a game in which Farland may impose trade sanctions against U.S.firms and the United States may not renew MFN status with Farland.The table contains the dollar value of all trade-flow benefits to the United States and Farland. -Refer to Table 17-10.If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e. ,enter into an agreement about the policy they should adopt),then we would expect the countries to agree to which outcome?

Table 17-11 Two home-improvement stores (Big Box Deluxe and Homes R Us)in a growing urban area are interested in expanding their market share.Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base.The following game depicts the strategic outcomes that result from the game.Increases in annual profits of the two home-improvement stores are shown in the table below. -Refer to Table 17-11.Suppose the owners of Big Box Deluxe and Homes R Us meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit.They should both agree to

According to the Clayton Act,

An agreement among firms regarding price and/or production levels is called

Figure 17-2.John and Michael are roommates.On a particular day,their apartment needs to be cleaned.Each person has to decide whether to take part in cleaning.At the end of the day,either the apartment will be completely clean (if one or both roommates take part in cleaning),or it will remain dirty (if neither roommate cleans).With happiness measured on a scale of 1 (very unhappy)to 10 (very happy),the possible outcomes are as follows: -Refer to Figure 17-2.In pursuing his own self-interest,John will

Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc. )and Wal-Mart.Which of the following will always be true?

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called

Table 17-8.For a certain small town,the table shows the demand schedule for water.Assume the marginal cost of supplying water is constant at $4 per bottle. -Refer to Table 17-8.If there are two suppliers of water,Mort and Callie,and if they have successfully formed a cartel,then what would be the price and the market quantity?

Table 17-6.The table shows the demand schedule for a particular product. -Refer to Table 17-6.Suppose the market for this product is served by two firms that have formed a cartel.What price will the cartel charge in this market if the marginal cost of production is $4?

A dominant strategy is one that

The essence of an oligopolistic market is that there are only a few sellers.

Table 17-18.Amy and Heather are two college roommates who both prefer a clean common space in their dorm room,but neither enjoys cleaning.The roommates must each make a decision to either clean or not clean the dorm room's common space.The payoff table for this situation is provided below,where the higher a player's payoff number,the better off that player is.The payoffs in each cell are shown as (payoff for Amy,payoff for Heather). -Refer to Table 17-18.If Amy chooses to not clean,then Heather will

Scenario 17-4.Consider two cigarette companies,PM Inc.and Brown Inc.If neither company advertises,the two companies split the market and earn $50 million each.If they both advertise,they again split the market,but profits are lower by $10 million 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.In this case,the company that advertises earns $60 million while the company that does not advertise earns only $30 million. -Refer to Scenario 17-4.What will these two companies do if they behave as individual profit maximizers?

A law that encourages market competition by prohibiting firms from gaining or exercising excessive market power is

From society's standpoint,cooperation among oligopolists is

Table 17-8.For a certain small town,the table shows the demand schedule for water.Assume the marginal cost of supplying water is constant at $4 per bottle. -Refer to Table 17-8.If there are two suppliers of water,Mort and Callie,and if they have successfully formed a cartel and split the market evenly,then how many bottles will Callie supply?

Table 17-20.Brian and Matt own the only two bicycle repair shops in town.Each must choose between a low price for repair work and a high price.The annual economic profit from each strategy is indicated in the table.The profits are shown as (Matt,Brian)in each cell. -Refer to Table 17-20.Which of the following statements is correct?