Man Ec: #11 Flashcards
Oligopolists recognize their mutual interdependence because
the product is differentiated
industry sales are large
there are few firms in the market
all of the above
c
An important implication of the kinked demand curve model is
that oligopolists typically will refrain from price-cutting since they can expect matching cuts from rivals, which will nullify any profit gains
that collusion on prices is quite probable because of the ease with which rival products can be substituted
the forces are operating in oligopolistic markets that will result in more frequent price changes than in perfectly competitive industries
that each oligopolist has a strong incentive to charge a price corresponding to the output where MC = MR
all of the above
a
Which of the following is an advantage to be derived by oligopolistic firms from collusion?
increased profits
decreased uncertainty
a better opportunity to control the entry of new firms
all of the above
d
It is difficult to maintain a cartel for a long period of time. Which of the following is the more important reason explaining this result?
No firm has an incentive to cheat.
Firms outside the industry will encounter barriers to entry.
Some firms in the cartel will cheat.
Consumers will deplete the inventories of the cartel and the agreement collapses.
c
The most distinguishing feature of oligopolistic markets is the
large advertising expenditures
long-run profitability
absence of non-price competition
interdependence of firms
d
Suppose that a hitherto unorganized industry is formed into a cartel. What price will it charge?
The cartel may choose a price above the monopoly price.
The cartel will choose a price equal to the monopoly price.
The cartel must choose a price below the monopoly price and often above the competitive price.
b
The cartel is simply a monopoly organization uniting oligopolistic firms under a single management. The best it can do after organization is to charge a monopoly price.
According to the kinked demand curve model,
none of these
profits are greater above the kink than below the kink
the higher the cost curves, the more pronounced is the kink in each firm’s demand curve
sellers have no incentive to increase or decrease the price
rival oligopolists will tend to make frequent, independent changes in price
d
The kinked demand curve features a discontinuous
pricing impulse economic rationale marginal revenue curve cost increase
c
In game theory, a non-cooperative equilibrium is not possible.
true false
false
Gains will usually be lower if players are not permitted to cooperate, but often the nature of the situation prohibits cooperation, just as it does in the prisoner’s dilemma game. That does NOT prohibit an equilibrium, however.
In game theory’s Nash equilibrium, a player pursues his own best payoff without regard to what the rival(s) may do.
true false
false
In a Nash equilibrium, each player does the best he can do GIVEN the behavior of the other players.
An important implication of the kinked demand curve model is
that each oligopolist has no incentive to charge a price corresponding to the output where MC=MR
the forces are operating in oligopolistic markets that will result in more frequent price changes than in perfectly competitive industries
that oligopolists typically will refrain from price-cutting since they can expect matching cuts from rivals which will nullify any profit gains
that collusion on prices is quite probable because of the ease with which rival products can be substituted
c
A repeated game is one in which the players have to decide on strategies about the same situation with the same rivals repeatedly.
true false
true
This is precisely the situation with many games; they are not played on a one-time basis only.
A key question in the prisoner’s dilemma is whether the player of a game can cooperate with rivals.
true false
true
When the prisoner is facing the question of confessing and turning states evidence, the dilemma arises because he is not permitted to communicate with his partner criminal and, hence, to cooperate with him.
Oligopoly is a market structure characterized by a
large number of firms selling a homogenous product
single source of supply
few firms and a great deal of interdependence
large number of firms selling a highly differentiated product
single source of demand
c
If the aim of the cartel is to maximize cartel profits, it will allocate sales to firms in such a way that
sales are in accord with the firm’s productive capacity
sales are in accord with a firm’s level of sales in the past
those firms with the most influence receive the largest sales quotas
sales are evenly divided among the firms
the marginal cost of all firms is equal
This would assure that high-cost producers have the same production quota as low-cost producers, making the total industry cost of production higher than need be.
In game theory, the prisoner’s dilemma is whether to deny involvement in a crime or to confess, turn state’s evidence, and incriminate your partner in crime.
true false
true
This is a particular, original form of the problem; it captures the basic idea of the problem well.
new chap
new chap
We speak of market failure when
there are numerous bankruptcies
many firms exit the market
the market fails to reach an efficient equilibrium
its equilibrium point is less than one
c
A benefit that is involuntarily imposed on another party is considered a
public benefit negative externality private cost positive externality
d
Which of the following is not a characteristic of the Coase theorem?
The outcome will be efficient if all assumptions are met.
Transactions costs must be present.
Property rights must be clearly assigned.
No bargaining costs can be involved.
b
When the allocation of goods, services, and productive resources is such that no alternative allocation could improve the well-being of at least one party without reducing that of any other party, that allocation is said to be
efficient a virtual corporation in equilibrium profit-maximizing
a
The free-rider problem occurs when a choice is made by a firm to not pay for goods and services it has received.
true false
false
This is just dishonest behavior. Defaulting on payments is not free riding. Free riding is when you are in a situation that you can participate in some public-good situation where you can’t be required to pay.
The ultimate public good is
good water
national defense
the environment
the American dream, or the right to own your own home
c
The Atlantic Ocean is not particularly endowed with properties associated with public goods.
true false
false
It is difficult to exclude private individuals and institutions from its use, so it is like a public good.