Exam 17: Oligopoly

Table 17-7.The table shows the demand schedule for a particular product. -Refer to Table 17-7.Suppose the marginal cost to produce this product is constant at $1 per unit.If this market is served by two duopolists who choose their production levels independently,acting in their own self-interest,what is the Nash equilibrium production level for each firm?

Scenario 17-3.Consider two countries,Muria and Zenya,that are engaged in an arms race.Each country must decide 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 following table shows the possible outcomes for each decision combination.The numbers in each cell represent the country's ranking of the outcome (4 = best outcome,1 = worst outcome). -Refer to Scenario 17-3.Which of these statements is correct?

If duopolists individually pursue their own self-interest when deciding how much to produce,the amount they will produce collectively will

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.This particular game

Cartels with a small number of firms have a greater probability of reaching the monopoly outcome than do cartels with a larger number of firms.

Table 17-4.The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market.Assume that each company that provides these subscriptions incurs an annual fixed cost of $200,000 (per year)and that the marginal cost of providing an additional subscription is always $80. -Refer to Table 17-4.Assume there are two profit-maximizing high-speed Internet service providers operating in this market.Further assume that they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions.How much profit will each company earn?

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.The possible outcome in which both John and Michael clean is analogous to which of the following outcomes of the duopoly game?

A lack of cooperation by oligopolists trying to maintain monopoly profits

The more firms an oligopoly has,

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.When this game reaches a Nash equilibrium,profits for Firm A and Firm B will be

The Sherman Antitrust Act prohibits executives of competing companies from

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 were only one supplier of water,what would be the price and quantity?

Once a cartel is formed,the market is in effect served by

The theory of oligopoly provides another reason that free trade can benefit all countries because

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 clean,then Heather will

Nobel prize-winner Thomas Schelling

Table 17-1 Imagine a small town in which only two residents,Lisa and Mark,own wells that produce safe drinking water.Each week Lisa and Mark work together to decide how many gallons of water to pump.They bring the water to town and sell it at whatever price the market will bear.To keep things simple,suppose that Lisa and Mark can pump as much water as they want without cost so that the marginal cost of water equals zero.The weekly town demand schedule and total revenue schedule for water is shown in the table below: -Refer to Table 17-1.If the market for water were perfectly competitive instead of monopolistic,how many gallons of water would be produced and sold?

As a group,oligopolists would always earn the highest profit if they would

If duopolists individually pursue their own self-interest when deciding how much to produce,the profit-maximizing price they will charge for their product will be

A group of firms that act in unison to maximize collective profits is called a