Exam 14: Oligopoly: Firms in Less Competitive Markets

The value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

A market comprised of only two firms is called a

Patents,tariffs,and quotas are all examples of

Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.Both consider offering free pickup and delivery services.Table 14-5 shows the payoff matrix containing the expected quarterly profits for each firm. -Refer to Table 14-5.Does Henri have a dominant strategy? If yes,what is it?

The breakfast cereal industry has a four-firm concentration ratio of 80 percent.Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?

The prisoner's dilemma is used to analyze business situations in which one firm acts first and then other firms respond.

By the 21st century few people purchased printed encyclopedias.Which of the following competitive forces best explains this?

Collusion is common in oligopoly and monopolistically competitive industries.

The "Discount Department Stores" industry is highly concentrated.What does this mean?

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 cooperate,what prices will they select?

Suppose we want to use game theory to analyze how an oligopolist selects its optimal price.The cells of the payoff matrix show

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

Which of the following economists did not help to develop game theory analysis?

A prisoner's dilemma leads to a noncooperative equilibrium.

Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising budget to compete for customers.If one firm increases its advertising budget but the other does not,then the firm with the higher advertising budget will increase its profit.Table 14-4 shows the payoff matrix for this advertising game. -Refer to Table 14-4.How are the firms in this advertising game caught in a prisoner's dilemma?

Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising budget to compete for customers.If one firm increases its advertising budget but the other does not,then the firm with the higher advertising budget will increase its profit.Table 14-4 shows the payoff matrix for this advertising game. -Refer to Table 14-4.What is the Nash equilibrium in this game?

If economies of scale are relatively important in an industry,the typical firm's

Assume that Lexus (L)is the first automobile company to produce a luxury class hybrid automobile and is the only such company for the past four years.BMW is now considering producing its own luxury hybrid automobile and Lexus must decide whether or not to lower the price of its luxury hybrid to counter BMW's entry into the luxury hybrid niche. -Refer to Figure 14-1.Should Lexus lower its price in order to deter BMW's entry into the luxury hybrid automobile market?

For years,economists believed that market structure explained the ability of some firms to earn economic profits.For example,firms in industries with little competition and high barriers to entry would earn higher profits than firms in competitive industries with low entry barriers.Which of the following has caused economists to question this explanation and seek other explanations for why firms are profitable?

Suppose OPEC has only two producers,Saudi Arabia and Nigeria.Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Nigeria.The payoff matrix in Table 14-3 shows the profits earned per day by each country."Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota. -Refer to Table 14-3.Is there a dominant strategy for Nigeria and,if so,what is it?