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Exam 17: Oligopoly

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Question 161

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Table 17-11 Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking.Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses) .State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study.Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states. -Refer to Table 17-11.If both firms follow a dominant strategy,Firm B's profits (losses) will be

A) $-50
B) $-15
C) $-10
D) $-5

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

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Question 162

Multiple Choice

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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.If John chooses Drive Straight,what will Paul choose to do and what will Paul's payoff equal?

A) Turn,5
B) Drive Straight,0
C) Turn,10
D) Drive Straight,200

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

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Question 163

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Table 17-19 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk.The store owners each must make a decision to set a high milk price or a low milk price.The payoff table,showing profit per week,is provided below.The profit in each cell is shown as (Store 1,Store 2) . -Refer to Table 17-19.If grocery store 1 sets a low price,what price should grocery store 2 set? And what will grocery store 2's payoff equal?

Table 17-3.The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market.Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero. -Refer to Table 17-3.Assume there are two profit-maximizing digital cable TV companies operating in this market.Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell.What price will premium digital channel cable TV subscriptions be sold at when this market reaches a Nash equilibrium?

Resale price maintenance involves a firm

Firms do not need to be concerned about striking a balance between the price effect and the output effect when making production decisions in which of the following types of markets?

Table 17-2.The table shows the town of Pittsville's demand schedule for gasoline.For simplicity,assume the town's gasoline seller(s) incur no costs in selling gasoline. -Refer to Table 17-2.If the market for gasoline in Pittsville is perfectly competitive,then the equilibrium price of gasoline is

Other things the same,in which case is the quantity produced the highest?

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 (are) the Nash equilibrium (equilibria) in this Chicken game?

The likely outcome of the standard prisoners' dilemma game is that

As the number of firms in an oligopoly increases,the

Cooperation is easier to enforce in __________.

Table 17-15 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 17-15.Which of the following outcomes represents a Nash equilibrium in the game?

In the game in which two oil companies own adjacent oil fields,the companies will not use the oil efficiently because

In some games,the noncooperative equilibrium is bad for the players and bad for society.

In order to be successful,a cartel must

Assume that Peach Computers has entered into a resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc. ) but not with CompuMart.In this case,

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

A manufacturer of light bulbs sells its products to retail stores and requires the stores to sell the bulbs to customers for $2 per bulb.This practice is known as tying.

If duopoly firms that are not colluding were able to successfully collude,then