Exam 17: Oligopoly

Table 17-32 Suppose that Angelina and Brad own the only two professional photography stores in town. Each must choose between a low price and a high price for senior photo packages. The annual economic profit from each strategy is indicated in the table below: Angelina Low price High price -Refer to Table 17-32. Is there a Nash equilibrium? If so, describe it.

Resale price maintenance prevents retailers from competing on price.

Briefly describe the two arguments that economists make to defend the practice of resale price maintenance.

If duopolists colluded but then stopped colluding,

The story of the prisoners' dilemma shows why

Table 17-19 Consider a small town that has two grocery stores from which residents can choose to buy a loaf of bread. The store owners each must make a decision to set a high bread price or a low bread price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2). -Refer to Table 17-19. If grocery store 1 sets a high price, what price should grocery store 2 set? And what will grocery store 2's payoff equal?

Before the , agreements between oligopolists were unenforceable contracts; afterwards, such agreements were criminal conspiracies.

Table 17-3 Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below: -Refer to Table 17-3. Suppose that Maria and Miguel work together in order to operate as a profit-maximizing monopolist. How many gallons of milk will be produced and sold?

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

Cooperation is easier to achieve in .

Suppose the market for home-grown peppers in the town of Smallville is comprised of two farmers. Suppose the two farmers try to collude. Explain why their collusion might not be successful.

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, Victor and Sami, and if they have successfully formed a cartel, then what would be the price and the market quantity?

Assume oligopoly firms are profit maximizers, they do not form a cartel, and they take other firms' production levels as given. Then in equilibrium the output effect

Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-5. If this game is played only once, then the most likely outcome is that

Assume that Bart's Batteries has entered into a resale price maintenance agreement with Radio Shanty but not with Prime Purchase. In this case,

Table 17-14 This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). -Refer to Table 17-14. If both players choose their best strategies, player A will earn a payoff of

What effect does the number of firms in an oligopoly have on the characteristics of the market?

Game theory is necessary to understand which kinds of markets?

Table 17-5 The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero. -Refer to Table 17-5. If there is only one digital cable TV company in this market, what price would it charge for a premium digital channel subscription to maximize its profit?

If firms in an oligopoly agree to produce according to the monopoly outcome, they will produce the same level of output as they would produce in a Nash equilibrium.