Exam 15: Oligopoly and Strategic Behavior

Exhibit 15-3 Prior to the year 2000,the United States considered renewal of Most Favored Nation (MFN)trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations).Historically,legislators made threats of not renewing MFN status because of alleged human rights abuses in China.The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China.The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U.S.firms and the United States chooses whether to renew MFN status with China. Refer to Exhibit 15-3.Assume that trade negotiators meet to discuss trade policy between the United States and China.If neither party to the negotiation is able to trust the other party,then:

In which market structure is there the greatest degree of mutual dependence between firm in choosing their price and output policies?

Predatory pricing:

What is a Nash equilibrium?

Which of the following statements characterize an oligopoly market?

The maximum possible profit that could be earned by a cartel is:

Oligopoly is an industry with a small number of firms producing homogeneous or differentiated goods with minimal barriers to entry.

A successful cartel ____ supply so that member firms earn ____ profits.

Economists believe that oligopolists like American Airlines and the Kellogg Company:

Firms may be tempted to cheat on cartel agreements by:

A consumer's demand for a product increases because other consumers own it.This is an example of:

A large oligopolistic firm that unilaterally makes changes in price which competitors tend to follow is known as a:

Collusive behavior guarantees economic profits in the long run for oligopolists.

Exhibit 15-6 Refer to Exhibit 15-6.In this situation:

The "Prisoners' Dilemma" is an example of a cooperative game.

Which of the following is characteristic of oligopoly firms,but not of monopolistically competitive firms?

Cartels are:

Collusion among oligopolists would generally be easiest to achieve in which of the following situations?

A basic characteristic of the firms in an oligopoly market structure is that they are:

Exhibit 15-4 Refer to Exhibit 15-4.Given the above prisoner's dilemma table,if Bonnie and Clyde each make self-interested decisions in a noncooperative game,how much time will each spend in jail?