Question 1

Assume that demand for a product that is produced at zero marginal cost is reflected in the table below.
 $$\begin{array} { | c | c | } 
\hline \text { Quantity } & \text { Price } \
\hline 0 & \text { R36 } \
\hline 200 & \text { R33 } \
\hline 400 & \text { R30 } \
\hline 600 & \text { R27 } \
\hline 800 & \text { R24 } \
\hline 1000 & \text { R21 } \
\hline 1200 & \text { R18 } \
\hline 1400 & \text { R15 } \
\hline 1600 & \text { R12 } \
\hline 1800 & \text { R9 } \
\hline 2000 & \text { R } 6 \
\hline 2200 & \text { R3 } \
\hline 2400 & \text { R } 0 \
\hline
\end{array}$$ 
a. What is the profit-maximising level of production for a group of oligopolistic firms that operate as a cartel?
b. Assume that this market is characterised by a duopoly in which collusive agreements are illegal. What market price and quantity will be associated with a Nash equilibrium?

Accepted Answer

a. Q = 1 2...

Question 2

Game theory is important for understanding which of the following market types?

Accepted Answer

A)   Perfectly competitive and oligopolistic markets.
B)   Perfectly competitive markets, but not oligopolistic markets.
C)   Oligopolistic, but not perfectly competitive markets.
D)   Neither oligopolistic nor perfectly competitive markets.E) B) and D)
F) All of the above

Question 3

An agreement among firms in a market about quantities to produce or prices to charge is called

Accepted Answer

A)   collusion.
B)   a strategic situation.
C)   excess capacity.
D)   tying.E) B) and D)
F) All of the above

Question 4

The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market.

Accepted Answer

A) True 
 B)False

Question 5

Many economists argue that resale price maintenance

Accepted Answer

A)   has a legitimate purpose of stopping discount retailers from free-riding on the services provided by full service retailers.
B)   is price fixing and, therefore, is prohibited by law.
C)   is price fixing and, therefore, is prohibited by law and enhances the market power of the producer.
D)   enhances the market power of the producer.E) A) and B)
F) C) and D)

Question 6

In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a

Accepted Answer

A)   quantifiable situation.
B)   cooperative situation.
C)   strategic situation.
D)   tactical situation.E) All of the above
F) A) and B)

Question 7

A distinguishing feature of an oligopolistic industry is the tension between

Accepted Answer

A)   profit maximisation and cost minimisation.
B)   cooperation and self-interest.
C)   producing a small amount of output and charging a price above marginal cost.
D)   Short-run decisions and long-run decisions.E) C) and D)
F) A) and C)

Question 8

The dominant strategy for an oligopolist is to cooperate with the group and maintain low production regardless of what the other oligopolists do.

Accepted Answer

A) True 
 B)False

Question 9

Explain the practice of tying and discuss why it is controversial.

Accepted Answer

Tying is the practice of bundling goods ...

Question 10

As the concentration ratio decreases, an oligopolistic market looks more like

Accepted Answer

A)   monopoly.
B)   duopoly.
C)   monopolistic competition.
D)   a collusion solution.E) B) and C)
F) All of the above

Question 11

When an oligopolist individually chooses its level of production to maximise its profits, it charges

Accepted Answer

A)   more than the price charged by either monopoly or a competitive market.
B)   less than the price charged by either monopoly or a competitive market.
C)   more than the price charged by a monopoly and less than the price charged by a competitive market.
D)   less than the price charged by a monopoly and more than the price charged by a competitive market.E) None of the above
F) All of the above

Question 12

The simplest type of oligopoly is

Accepted Answer

A)   monopoly.
B)   duopoly.
C)   monopolistic competition.
D)   oligopolistic competition.E) B) and C)
F) None of the above

Question 13

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Accepted Answer

A)   collude with each other.
B)   form various degrees of cartels.
C)   compete rather than cooperate with each other.
D)   cooperate rather than compete with each other.E) A) and B)
F) A) and C)

Question 14

A market structure in which many firms sell products that are similar but not identical is known as

Accepted Answer

A)   monopolistic competition.
B)   monopoly.
C)   perfect competition.
D)   oligopoly.E) All of the above
F) A) and B)

Question 15

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 bad for society?

Accepted Answer

A)   Two oil companies own adjacent oil fields over a common pool of oil, and each company decides whether to drill one well or two wells.
B)   Two airlines dominate air travel between City A and City B, and each airline decides whether to charge a "high" airfare or a "low" airfare on flights between those two cities.
C)   Two superpowers decide whether to build new weapons or to disarm.
D)   In all of the above cases, the cooperative outcome of the game is good for the two players and bad for society.E) B) and D)
F) A) and D)

Exam 16: Market Structures Iii: Oligopoly

The simplest type of oligopoly is

Correct Answer
verified

When an oligopolist individually chooses its level of production to maximise its profits, it charges

Correct Answer
verified

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Correct Answer
verified

Correct Answer
verified
a. Q = 1 2...
View Answer

Game theory is important for understanding which of the following market types?

Correct Answer
verified

Many economists argue that resale price maintenance

Correct Answer
verified

A distinguishing feature of an oligopolistic industry is the tension between

Correct Answer
verified

As the concentration ratio decreases, an oligopolistic market looks more like

Correct Answer
verified

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 bad for society?

Correct Answer
verified

The dominant strategy for an oligopolist is to cooperate with the group and maintain low production regardless of what the other oligopolists do.

Correct Answer
verified

The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market.

Correct Answer
verified

An agreement among firms in a market about quantities to produce or prices to charge is called

Correct Answer
verified

In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a

Correct Answer
verified

Explain the practice of tying and discuss why it is controversial.

Correct Answer
verified
Tying is the practice of bundling goods ...
View Answer

A market structure in which many firms sell products that are similar but not identical is known as

Correct Answer
verified

Exam 16: Market Structures Iii: Oligopoly

The simplest type of oligopoly is

Correct AnswerverifiedShow Answer

When an oligopolist individually chooses its level of production to maximise its profits, it charges

Correct AnswerverifiedShow Answer

To move the allocation of resources closer to the social optimum, policymakers should typically try to induce firms in an oligopoly to

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Q = 1 2...View AnswerShow Answer

Game theory is important for understanding which of the following market types?

Correct AnswerverifiedShow Answer

Many economists argue that resale price maintenance

Correct AnswerverifiedShow Answer

A distinguishing feature of an oligopolistic industry is the tension between

Correct AnswerverifiedShow Answer

As the concentration ratio decreases, an oligopolistic market looks more like

Correct AnswerverifiedShow Answer

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 bad for society?

Correct AnswerverifiedShow Answer

The dominant strategy for an oligopolist is to cooperate with the group and maintain low production regardless of what the other oligopolists do.

Correct AnswerverifiedShow Answer

The unique feature of an oligopoly market is that the actions of one seller have a significant impact on the profits of all of the other sellers in the market.

Correct AnswerverifiedShow Answer

An agreement among firms in a market about quantities to produce or prices to charge is called

Correct AnswerverifiedShow Answer

In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a

Correct AnswerverifiedShow Answer

Explain the practice of tying and discuss why it is controversial.

Correct AnswerverifiedTying is the practice of bundling goods ...View AnswerShow Answer

A market structure in which many firms sell products that are similar but not identical is known as

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
a. Q = 1 2...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Tying is the practice of bundling goods ...
View Answer

Correct Answer
verified