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Exam 17: Oligopoly

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Question 111

Multiple Choice

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Which of the following statements is correct?

A) Strategic situations are more likely to arise when the number of decision-makers is very large rather than very small.
B) Strategic situations are more likely to arise in monopolistically competitive markets than in oligopolistic markets.
C) Game theory is useful in understanding certain business decisions,but it is not really applicable to ordinary games such as chess or tic-tac-toe.
D) Game theory is not necessary for understanding competitive or monopoly markets.

E) All of the above
F) C) and D)

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Question 112

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Table 17-2.The table shows the town of Pittsville's demand schedule for gasoline.For simplicity,assume the town's gasoline seller(s) incur no costs in selling gasoline. -Refer to Table 17-2.If the market for gasoline in Pittsville is a monopoly,then the profit-maximizing monopolist will charge a price of

A) $8 and sell 200 gallons.
B) $5 and sell 500 gallons.
C) $2 and sell 800 gallons.
D) $0 and sell 1,000 gallons.

E) None of the above
F) A) and C)

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Question 113

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Cartels with a small number of firms have a greater probability of reaching the monopoly outcome than do cartels with a larger number of firms.

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integration of its Internet browser into its Windows operating system,to be sold as one unit.This practice is known as

OPEC is able to raise the price of its product by

Acme Computer Co.sells computers to retail stores for $400.If Acme requires the retailers to charge customers $500 for the computers,then it is engaging in

Table 17-18 This table shows a game played between two firms,Firm A and Firm B.In this game each firm must decide how much output (Q) to produce: 10 units or 12 units.The profit for each firm is given in the table as (Profit for Firm A,Profit for Firm B) . -Refer to Table 17-18.The Nash equilibrium for this game is

Table 17-19 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk.The store owners each must make a decision to set a high milk price or a low milk 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.What is grocery store 2's dominant strategy?

Table 17-4.The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market.Assume that each company that provides these subscriptions incurs an annual fixed cost of $200,000 (per year) and that the marginal cost of providing an additional subscription is always $80. -Refer to Table 17-4.Assume that there are two profit-maximizing high-speed Internet service providers operating in this market.Further assume that they are not able to collude on the price and quantity of subscriptions to sell.How much profit will each firm earn when this market reaches a Nash equilibrium?

Assume that demand for a product that is produced at zero marginal cost is reflected in the table below. a.What is the profit-maximizing level of production for a group of oligopolistic firms that operate as a cartel? b.Assume that this market is characterized by a duopoly in which collusive agreements are illegal.What market price and quantity will be associated with a Nash equilibrium?

As the number of firms in an oligopoly becomes very large,the price effect disappears.

Table 17-4.The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market.Assume that each company that provides these subscriptions incurs an annual fixed cost of $200,000 (per year) and that the marginal cost of providing an additional subscription is always $80. -Refer to Table 17-4.Suppose there is only one high-speed Internet service provider in this market and it seeks to maximize its profit.The company will

Which strategy was the most successful in the prisoners' dilemma tournament?

If Levi Strauss & Co.were to require every retailer that carried its clothing to charge customers $42 for each pair of jeans,Levi Strauss & Co.would be practicing

For a firm,strategic interactions with other firms in the market become more important as the number of firms in the market becomes larger.

An agreement among firms regarding price and/or production levels is called

Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other.John and Paul have a common interest to avoid crashing into each other,but they also have a personal,competing interest to not turn first to demonstrate their courage to those observing the contest.The payoff table for this situation is provided below.The payoffs are shown as (John,Paul) . -Refer to Table 17-21.What is John's dominant strategy?

The Sherman Antitrust Act prohibits executives of competing companies from

Much of the research on game theory in recent decades was driven by attempts to analyze actions of players during

Table 17-19 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk.The store owners each must make a decision to set a high milk price or a low milk 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.What is the Nash Equilibrium of this price-setting game?