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Exam 17: Oligopoly

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Question 91

Multiple Choice

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In imperfectly competitive markets,increasing production will decrease the price of all units sold.This concept is known as the

A) income effect.
B) cost effect.
C) output effect.
D) price effect.

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

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Question 92

Multiple Choice

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Table 17-6.The table shows the demand schedule for a particular product. -Refer to Table 17-6.Suppose the market for this product is served by two firms that have formed a cartel.If the marginal cost of production is $0 and there is no fixed cost,the combined profit of the cartel will be

A) $16
B) $24
C) $30
D) $32

E) All of the above
F) B) and C)

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Question 93

True/False

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Any market that is served by an oligopoly is in effect served by a monopoly.

How does the prisoners' dilemma game apply to real-life situations?

Table 17-9 Only two firms,Acme and Pinnacle,sell a particular product.The table below shows the demand curve for their product.Each firm has the same constant marginal cost of $10 and zero fixed cost. -Refer to Table 17-9.How much less do each of these firms earn in the Nash equilibrium than if they jointly maximize profits?

Figure 17-2.Hector and Bart are roommates.On a particular day,their apartment needs to be cleaned.Each person has to decide whether to take part in cleaning.At the end of the day,either the apartment will be completely clean (if one or both roommates take part in cleaning) ,or it will remain dirty (if neither roommate cleans) .With happiness measured on a scale of 1 (very unhappy) to 10 (very happy) ,the possible outcomes are as follows: -Refer to Figure 17-2.In pursuing his own self-interest,Bart will

The game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoners' dilemma.

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called

In the prisoners' dilemma game,one prisoner is always better off confessing,no matter what the other prisoner does.

The simplest type of oligopoly is

Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other.John and Paul have a common interest to avoid crashing into each other,but they also have a personal,competing interest to not turn first to demonstrate their courage to those observing the contest.The payoff table for this situation is provided below.The payoffs are shown as (John,Paul) . -Refer to Table 17-21.What is Paul's dominant strategy?

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 Nadia's dominant strategy?

A dominant strategy is one that

When firms are faced with making strategic choices in order to maximize profit,economists typically use

Figure 17-2.Hector and Bart are roommates.On a particular day,their apartment needs to be cleaned.Each person has to decide whether to take part in cleaning.At the end of the day,either the apartment will be completely clean (if one or both roommates take part in cleaning) ,or it will remain dirty (if neither roommate cleans) .With happiness measured on a scale of 1 (very unhappy) to 10 (very happy) ,the possible outcomes are as follows: -Refer to Figure 17-2.The dominant strategy for Hector is to

Table 17-14 This table shows a game played between two players,A and B.The payoffs in the table are shown as (Payoff to A,Payoff to B) . -Refer to Table 17-14.Which outcome is the Nash equilibrium in this game?

In the prisoners' dilemma game with Bonnie and Clyde as the players,the likely outcome is one

A particular cable TV company requires a household to subscribe to its high-speed Internet service if it subscribes to cable TV,and vice versa.This practice

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,what price will they charge?

Figure 17-1 -Refer to Figure 17-1.Suppose this market is served by two firms who each face the marginal cost curve shown in the diagram.The marginal revenue curve that a monopolist would face in this market is also shown.If the firms are able to collude successfully,