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Exam 12: Oligopoly and Strategic Behavior

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Question 51

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In perfectly contestable markets,large oligopolistic firms end up pricing like

A) monopolistically competitive firms.
B) a monopoly.
C) competitive firms.
D) a cartel.

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Question 52

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If a firm uses a grim trigger retaliation strategy,all firms could end up with zero economic profit.

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Question 53

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-Refer to Figure 12.1.Assume the firms have formed a cartel.If the cartel is maximizing profits,the cartel's profits are

The beer industry is an example of a oligopolistic industry.

Recall the Application about the attempt to form a salt cartel in the 19th century to answer the following question(s) . -Recall the Application.Why did the salt cartel fail to get established,even though it paid new firms not to produce salt for a year?

Limit pricing is the strategy of raising the price to deter entry.

-Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Lil Box decides not to advertise,

The cigarette industry is NOT an example of an oligopolistic industry.

If firms in an oligopoly form a cartel,the outcome is the same as it would be under monopolistic competition.

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is

In a two-person repeated game,a grim-trigger strategy results in

Which of the following firms will find it most useful to engage in advertising?

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.If both firms follow their dominant strategies

Suppose that Sun Beach only has three movie theaters.One movie theater decreases its movie ticket price and later that same day,the other two do the same.Which of the following is true?

Table 12.2 -Refer to Table 12.2.Jeri and Tom are arrested for having committed a crime.They are being interrogated individually and need to decide if they should confess or not confess.The police have enough information to put them in jail for 5 years.They also know the pair have committed a more egregious crime but without the help of one of the suspects they will not be able to convict them on this charge.The first number in each cell refers to the number of years of prison time Jeri will receive if she confesses or does not confess and the second number in each cell refers to the number of years of prison time Tom will receive if he confesses or does not confess.The dominant strategy for Jeri is to ________ and the dominant strategy for Tom is to ________.

12.3 Simultaneous Decision Making and the Payoff Matrix -Refer to Figure 12.7 The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.In the Nash equilibrium

Consider four types of markets: monopoly,perfect competition,oligopoly,and monopolistic competition.If they were ranked from the lowest number of firms to the largest number of firms,the ranking would be:

-Figure 12.2 shows the decision tree for setting price for the only two firms in a market.The dominant strategy for firm A

The low-price guarantee results in an outcome equivalent to perfect competition.

When a company increases output and accepts a lower price to keep new companies from entering the market,it is engaging in