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Exam 14: Oligopoly

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Question 71

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An industry in which there are five firms each accounting for 20 percent of the market has an HHI of 100.

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Question 72

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Cartels, tacit collusion, and predatory pricing are all illegal under U.S. antitrust laws.

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Question 73

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The price-leadership model assumes a dominant firm allows the smaller firms to sell ________ at the price the leader has set.

Which of the following industries is the best example of an oligopoly?

Game theory was first developed by John Nash.

A prisoners' dilemma can possibly be avoided in repeated games.

Which of the following is not an assumption of the Cournot model presented in the text?

If there are two firms in an industry and each has 50 percent market share, then the Herfindahl-Hirschman Index equals

The U.S. beer industry has an HHI of 3,525. If two beer producers propose a merger that would increase the industry HHI by 75 points, then the merger would be challenged based on the change in the HHI.

Price leadership is an example of the Cournot model.

In contestable markets, large oligopolistic firms end up behaving like

Refer to the information provided in Table 14.4 below to answer the question that follows. Table 14.4 B's Strategy $\begin{array} { l l l l } \hline & & \text { Raise Price } & \text { Don't Raise Price } \\\hline & \text { Raise } & \text { A's profit } \$ 6,000 & \text { A's profit } \$ 20,000 \\& \text { Price } & \text { B's profit } \$ 6,000 & \text { B's profit } \$ 30,000 \\\text { A's Strategy } & & & \\& \text { Don't A's profit } \$ 30,000 & \text { A's profit } \$ 10,000 \\& \text { Raise } & B ^ { \prime } \text { s profit } \$ 20,000 & \text { B's profit } \$ 10,000\end{array}$ -Refer to Table 14.4. Firm A does not have a dominant strategy.

Refer to the information provided in Table 14.4 below to answer the question that follows. Table 14.4 B's Strategy $\begin{array} { l l l l } \hline & \text { Raise Price } & \text { Don't Raise Price } \\\hline & \text { Raise } \text { A's profit } \$ 6,000 & \text { A's profit } \$ 20,000 \\& \text { Price } \text { B's profit } \$ 6,000 & \text { B's profit } \$ 30,000 \\\text { A's Strategy } & & & \\& \text { Don't A's profit } \$ 30,000 & \text { A's profit } \$ 10,000 \\& \text { Raise } & B ^ { \prime } \text { s profit } \$ 20,000 & \text { B's profit } \$ 10,000\end{array}$ -Refer to Table 14.4. Firm A?s optimal strategy is

An oligopoly with a dominant price leader will produce a level of output below that which would prevail under ________ and above that which a ________ would choose in the same industry.

Refer to the information provided in Table 14.2 below to answer the question that follows. Table 14.2 B's Strategy $\begin{array} { l l l l } \hline & & { \text { Advertise } } & \text { Don't Advertise } \\\hline & & \text { A's profit } \$ 100 & \text { A's profit } \$ 200 \\& & \text { million } & \text { million } \\& & \text { B's profit } \$ 100 & \\& \text { Advertise } & \text { million } & \text { B's profit } \$ 50 \text { million } \\\text { A's Strategy } & & & \\& & \text { A's profit } \$ 50 & \text { A's profit } \$ 75 \\& \text { Don't } & \text { million } & \text { million } \\& & \text { B'sprofit } \$ 200 & \text { B's profit } \$ 75 \\& \text { Advertise } & \text { million } & \text { million }\end{array}$ -Refer to Table 14.2. Firm A's dominant strategy is to not advertise.

Products ________ in the oligopolistic market structure.

In game theory, when all players are playing their best strategy given what their competitors are doing, the result is a Nash equilibrium.

The price-leadership model is best applied when there are no dominant firms in a market.

Economists ________ because even firms in highly concentrated industries can be pushed to produce efficiently under certain market circumstances.

Game theory was first developed by John von Neumann and Oskar Morgenstern.