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Exam 17: Oligopoly

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Question 1

Multiple Choice

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Why would lack of cooperation between criminal suspects be desirable for society as a whole

A) The suspects are able to choose optimal outcomes for themselves by acting on self-interest.
B) The prisoners' dilemma safeguards the criminals' constitutional rights.
C) The police will be able to convict more criminals.
D) Costs of trials would be reduced.

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

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Question 2

Multiple Choice

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As the number of firms in an oligopoly increases,what happens

A) Each seller becomes more concerned about its impact on the market price.
B) The output effect decreases.
C) The quantity of output becomes closer to the socially efficient quantity.
D) The price of the firms' products and services increases.

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

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C

Question 3

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Scenario 17-1 Assume that the countries of Irun and Urun are the only two producers of crude oil.Further assume that both countries have entered into an agreement to maintain certain production levels in order to maximize profits.In the world market for oil, the demand curve is downward sloping. -Refer to Scenario 17-1.The fact that both countries have colluded to earn higher profit shows their desire to keep production at what level

Describe the output and price effects that influence the profit-maximizing decision faced by a firm in an oligopoly market.How does this differ from output and price effects in a monopoly market?

Self-interest usually results in what kind of outcome for the players in a prisoners' dilemma game

There are some logical economic arguments in favour of resale price maintenance.

When oligopolistic firms interacting with one another,each choose their best strategy given the strategies chosen by other firms in the market,what do we have

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

Scenario 17-4 Assume that a local bank sells two services, chequing accounts and ATM card services.Mr.Leung is willing to pay $10 a month for the bank to service his chequing account and $6 a month for unlimited use of his ATM card.Ms.Gardner is willing to pay only $6 for a chequing account, but is willing to pay $10 for unlimited use of her ATM card.Assume that each customer uses only one service and that the bank can provide each of these services at zero marginal cost. -Refer to Scenario 17-4.If the bank is unable to use tying,what is the profit-maximizing price to charge for unlimited use of an ATM card

In the textbook,what is the likely outcome of the prisoners' dilemma

Table 17-4 Consider trade relations between Canada and Germany. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are as follows: -Refer to Table 17-4.Pursuing its own best interests,when will Canada play the low tariff strategy

Alma,Marcus,and Carlos are competitors in a local market,and each is trying to decide if it is worthwhile to advertise.If all of them advertise,each will earn a profit of $2000.If none of them advertise,each will earn a profit of $8000.If only one of them advertises,the one who advertises will earn a profit of $6000 and the other two will each earn $5000.If two of them advertise,those two will each earn a profit of $4000 and the other one will earn $3000.If all three follow their dominant strategy,what will Alma do and how much will she earn

George and Charlotte are competitors in a local market.Each is trying to decide if it is better to advertise on TV,on radio,or not at all.If they both advertise on TV,each will earn a profit of $3000.If they both advertise on radio,each will earn a profit of $5000.If neither advertises at all,each will earn a profit of $10,000.If one advertises on TV and the other advertises on radio,then the one advertising on TV will earn $4000 and the other will earn $2000.If one advertises on TV and the other does not advertise,then the one advertising on TV will earn $8000 and the other will earn $5000.If one advertises on radio and the other does not advertise,then the one advertising on radio will earn $9000 and the other will earn $6000.If both follow their dominant strategy,what will George do and how much will he earn

In the textbook,why is the prisoners' dilemma an important game to study

Table 17-2 The information in the table depicts the total demand for wireless Internet subscriptions in a small urban market. Assume that each wireless Internet operator pays a fixed cost of $100,000 (per year) to provide wireless Internet in the market area and that the marginal cost of providing the wireless Internet service to a household is zero. -Refer to Table 17-2.Assume that there are two wireless Internet companies operating in this market.If they are able to "collude" on price and quantity of subscriptions to sell,what price (P) will they charge,and what quantity (Q) of subscriptions will they collectively sell

What is a special kind of imperfectly competitive market that has only two firms called

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

When an industry has many firms,the industry may be which of the following

Table 17-3 Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from provinces trying to recover the health-care related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses) . Provincial prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without obtaining at least one cigarette firm study. Each firm has been presented with an opportunity to lower their liability in the suit if they cooperate with attorneys representing the provinces. -Refer to Table 17-3.When this game reaches a Nash equilibrium,what will profits for Firm A and Firm B be

If duopolists individually pursue their own self-interest when deciding how much to produce,what do we know about the price they are able to charge for their product