Exam 17: Oligopoly

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together,

How does free trade relate to the theory of oligopoly?

Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-2. Acme and Pinnacle agree to cooperate so as to maximize total profit. If this game is played repeatedly and Acme uses a tit-for-tat strategy, it will choose a

Figure 17-4. Aaron and Ed are roommates. After a big snowstorm, their driveway needs to be shoveled. Each person has to decide whether to take part in shoveling the driveway. At the end of the day, either the driveway will be shoveled (if one or both roommates take part in shoveling), or it will remain unshoveled (if neither roommate shovels). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows: -Refer to Figure 17-4. In pursuing his own self-interest, Ed will

A group of firms that collude is called a cartel.

Table 17-35 Suppose that two coal mining companies - Allied and Barclay - own adjacent land suitable for excavating coal mines. The profits that each firm earns depends on both the number of mines it excavates and the number of mines excavated by the other firm. The table below lists each firm's individual profits: Allied Excavate one mine Excavate two mines -Refer to Table 17-35. Does Barclay have a dominant strategy? If so, describe it.

If two firms comprise the entire soft drink market, the market would be a(n)

Table 17-33 Suppose that Robert and Howard own the only two movie studios in California. Each producer must choose between a low budget and a high budget strategy for his next film. The economic profit from each strategy is indicated in the table below: Howard Low budget High budget -Refer to Table 17-33. Does Howard have a dominant strategy? If so, describe it.

The Sherman Antitrust Act prohibits price-fixing in the sense that

An agreement between two duopolists to function as a monopolist usually breaks down because

Which of the following examples illustrates an oligopoly market?

Table 17-15 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 17-15. Which of the following outcomes represents a Nash equilibrium in the game?

Table 17-2 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 17-2. Suppose the town enacts new antitrust laws that prohibit Abby and Brad from operating as a monopoly. How much profit will Abby and Brad each earn once they reach a Nash equilibrium?

Which of the following prohibits executives of competing firms from even talking about fixing prices?

The practice of tying is used to

Table 17-11 Only two firms, ABC and XYZ, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost. -Refer to Table 17-11. If this market were perfectly competitive instead of oligopolistic, what would the price be?

Antitrust laws in general are used to

Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-2. If this game is played only once, then the most likely outcome is that

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. The situation faced by ABC and QRS is

Scenario 17-6 Assume that a local telecommunications company sells high speed internet access and cable television. The company's only two customers are Taylor and Tim. Taylor is willing to pay $50 per month for high speed internet access and $50 per month for cable television. Tim is willing to pay only $20 per month for high speed internet access, but is willing to pay $70 per month for cable television. Assume that the telecommunications company can provide each of these products at zero marginal cost. -Refer to Scenario 17-6. If the telecommunications company is unable to use tying, what is the profit-maximizing price to charge for high speed internet access?