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Exam 17: Oligopoly

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Question 31

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When firms are faced with making strategic choices to maximize profit, economists typically use

A) the theory of monopoly to model their behavior.
B) the theory of aggressive competition to model their behavior.
C) game theory to model their behavior.
D) cartel theory to model their behavior.

E) B) and C)
F) A) and C)

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Question 32

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Like monopolists, oligopolists are aware that an increase in the quantity of output always

A) reduces the price of their product.
B) reduces their profit.
C) reduces their revenue.
D) reduces productivity.

E) All of the above
F) A) and B)

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Question 33

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If a person can prove that she was damaged by an illegal arrangement to restrain trade, that person can sue and recover

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. How much less do each of these firms earn in the Nash equilibrium than if they jointly maximize profits?

To be successful, a cartel must

Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output. If the two firms successfully reach and maintain the cooperative outcome of the game, then

If all of the firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal to what it would be if the market were a monopoly.

As the number of firms in an oligopoly increases, the magnitude of the price effect increases.

Which of the following examples illustrates an oligopoly market?

​Table 17-36 The information in the table shows the total demand for water service in Takoma. Assume that there are two companies operating in Takoma. Each company that provides these services incurs an annual fixed cost of $400 and that the marginal cost of providing the service to each customer is exactly $2.00. Figures listed are for an annual service contract. ​ -​Refer to Table 17-36. If there were only one water service provide in this market, and this single firm maximizes profits, the company will

If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production with the aim of

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?

What effect does the number of firms in an oligopoly have on the characteristics of the market?

Table 17-31 Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below: -Refer to Table 17-31. Briefly explain why each duopolist earns a lower profit at the Nash equilibrium than if they cooperated to produce the monopoly output.

A law that encourages market competition by prohibiting firms from gaining or exercising excessive market power is

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 dominant strategy For Firm A is to produce

Compare the equilibrium output in a duopoly to the monopoly output.

In a duopoly if the firms have agreed to jointly maximize profits, then each firm can increase its current individual profits by producing more.

A firm that practices resale price maintenance

The Sherman Antitrust Act prohibits executives of competing companies from