Exam 14: Oligopoly: Firms in Less Competitive Markets

In 2013, the Educational Testing Service (ETS) charged $51 to take the Scholastic Aptitude Test (SAT) but $150 to take the Graduate Record Exam (GRE). One reason for this difference in price is

Figure 15-18 -Which of the following is not part of an oligopolist's business strategy?

Producing a differentiated product occurs in which of the following industries?

Figure 14-5 A few years ago Netflix (N) pioneered an online DVD rental service. Blockbuster (B), a brick and mortar DVD/video rental company, waited until Netflix had been in business for over a year before deciding whether to establish its own online rental service. At this point, Netflix had to decide whether or not to lower its subscription price in order to deter Blockbuster's entry into the market. Figure 14-5 shows the decision tree for the Netflix-Blockbuster entry game. -Refer to Figure 14-5. Does it make sense for Netflix to lower its price in order to deter Blockbuster's entry into the online DVD rental market?

Table 14-8 Two rival oligopolists in the athletic supplements industry, the Power Fuel Company and the Brawny Juice Company, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts. -Refer to Table 14-8. If the firms act out of individual self-interest, which prices will they select?

A patent is a government-imposed entry barrier because

In game theory, the three key characteristics of a game are

A sequential game can be used to analyze whether a retail firm should build a large store or a small store in a city, when the correct choice depends on whether a competing firm will build a new store in the same city. Which of the following is used to analyze this type of decision?

Explain why selling output at a price below that at which marginal revenue equals marginal cost might serve to deter entry of a potential competitor.

Decision trees can only be used to analyze sequential games.

Which of the following is not necessarily a consequence of occupational licensing laws?

Figure 14-2 The government of a developing country plans to award two firms, Gigacom and Xenophone, the exclusive rights to share the market for high speed Internet service. Gigacom and Xenophone can both provide the service either via television cable lines or via direct subscriber line (dbl). Suppose the government is considering a proposal to delay one firm's entry into the market on the grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision tree for this game. -Refer to Figure 14-2. Now suppose that the government delays Xenophone's entry and Gigacom moves first, what is the likely outcome in the market?

A patent is an example of

Table 14-8 Two rival oligopolists in the athletic supplements industry, the Power Fuel Company and the Brawny Juice Company, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts. -Refer to Table 14-8. If the two firms collude, is there an incentive for either to cheat on the collusion agreement?

Because of the shortcomings of concentration ratios, some economists prefer another measure of competition called

All games share three characteristics. Two of these characteristics are rule and strategies. What is the third characteristic called?

Which of the following is important in determining the extent of competition in an industry?

What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

If firms are protected by substantial barriers to entry, short-run profits can turn into long-run profits.

Oligopolies exist and do not attract new rivals because