Exam 17: Oligopoly

Table 17-30 Imagine a small town in which only two residents, Abby and Brad, own wells that produce safe drinking water. Each week Abby and Brad work together to decide how many gallons of water to pump. They bring water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Abby and Brad can pump as much water as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below: -Refer to Table 17-30. Discuss the difference between the monopoly outcome and the Nash equilibrium.

The story of the prisoners' dilemma shows why

In a duopoly situation, the logic of self-interest results in a total output level that

Explain the practice of tying and discuss why it is controversial.

Table 17-13 Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below. 14. -Refer to Table 17-13. If both stores follow a dominant strategy, Lopes's annual profit will grow by

Oligopolies would like to act like a

Government regulators might suspect a firm of engaging in predatory pricing if it charges prices that seem to be too __________.

Which of the controversial business practices, resale price maintenance, predatory pricing, or tying, was a part of a long-running antitrust lawsuit against Microsoft and why?

All cartels are inherently reliant on

The decisions of the US and Soviet Union to build nuclear weapons is much like the prisoners' dilemma.

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and good for society?

As the number of firms in an oligopoly increases, the price approaches

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

Table 17-20 Nadia and Maddie 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 Nadia, payoff for Maddie). -Refer to Table 17-20. If Maddie chooses to clean, then Nadia will

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. Does Brad have a dominant strategy? If so, describe it.

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. Does Angelina have a dominant strategy? If so, describe it.

Antitrust laws tend to target restraint of trade as characterized by .

The prisoners' dilemma game

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

The Clayton Act of 1914 allows those harmed by illegal arrangements to restrain trade to