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Exam 17: Oligopoly

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Question 211

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

A) lowering prices.
B) increasing profits for the group of firms as a whole.
C) increasing profits for itself,regardless of the impact on profits for the group of firms as a whole.
D) None of the above is correct.

E) A) and D)
F) C) and D)

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Question 212

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When firms have agreements among themselves on the quantity to produce and the price at which to sell output,we refer to their form of organization as a

A) Nash arrangement.
B) cartel.
C) monopolistically competitive oligopoly.
D) perfectly competitive oligopoly.

E) B) and C)
F) C) and D)

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Question 213

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Table 17-8.For a certain small town,the table shows the demand schedule for water.Assume the marginal cost of supplying water is constant at $4 per bottle. -Refer to Table 17-8.If there are two suppliers of water,Victor and Sami,and if they have successfully formed a cartel and split the market evenly,then how many bottles will Sami supply?

Tying is always profitable for a monopoly.

The problems faced by oligopolies with three or more members are entirely different from the problems faced by duopolies.

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?

Table 17-1 Imagine a small town in which only two residents,Rochelle and Alec,own wells that produce safe drinking water.Each week Rochelle and Alec work together to decide how many gallons of water to pump.They bring the water to town and sell it at whatever price the market will bear.To keep things simple,suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero.The weekly town demand schedule and total revenue schedule for water is shown in the table below: -Refer to Table 17-1.If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water,how much profit will each of them earn?

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. -Refer to Table 17-13.If both stores follow a dominant strategy,HomeMax's annual profit will grow by

Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g. ,bauxite) market?

Which of these situations produces the largest profits for oligopolists?

Table 17-3 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 17-3.Does Angelina have a dominant strategy? If so,describe it.

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.What is the Nash Equilibrium in this dorm room cleaning game?

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.If grocery store 2 sets a low price,what price should grocery store 1 set? And what will grocery store 1's payoff equal?

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

During the 1990s,the members of OPEC operated independently from one another,causing the world market for crude oil to become close to

Table 17-5.Imagine a small town in which only two residents,Kunal and Naj,own wells that produce safe drinking water.Each week Kunal and Naj work together to decide how many gallons of water to pump,to bring the water to town,and to sell it at whatever price the market will bear.Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water are shown in the table below. -Refer to Table 17-5.Suppose the town enacts new antitrust laws that prohibit Kunal and Naj from operating as a monopolist.What will the new price of water be once the Nash equilibrium is reached?

Table 17-1 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 17-1.Briefly explain why each duopolist earns a lower profit at the Nash equilibrium than if they cooperated to produce the monopoly output.

The argument that consumers will not be willing to pay any more for two items sold as one than they would for the two items sold separately is used to justify the legality of which of the following?

Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc. ) and Wal-Mart.Which of the following will always be true?

Table 17-16 This table shows a game played between two players,A and B.The payoffs are given in the table as (Payoff to A,Payoff to B) . -Refer to Table 17-16.Which of the following statements is true regarding this game?