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Exam 17: Oligopoly.

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Question 111

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The Sherman Antitrust Act

A) overturned centuries-old views of English and American judges on agreements among competitors.
B) had the effect of discouraging private lawsuits against conspiring oligopolists.
C) strengthened the Clayton Act.
D) elevated agreements among conspiring oligopolists from an unenforceable contract to a criminal conspiracy.

E) A) and B)
F) A) and D)

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Question 112

Multiple Choice

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When firms have agreements among themselves on the quantity to produce and the price at which to sell output,we refer to their form of organization as a

A) Nash arrangement.
B) cartel.
C) monopolistically competitive oligopoly.
D) perfectly competitive oligopoly.

E) C) and D)
F) None of the above

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Question 113

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

Explain how the output effect and the price effect influence the production decision of the individual oligopolist.

Tying involves a firm

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integration of its Internet browser into its Windows operating system,to be sold as one unit.This practice is known as

An equilibrium in which each firm in an oligopoly maximizes profit,given the actions of its rivals,is called

Scenario 17-5 Assume that a local bank sells two services, checking accounts and ATM card services. The bank's only two customers are Mr. Donethat and Ms. Beenthere. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. Assume that the bank can provide each of these services at zero marginal cost. -Refer to Scenario 17-5.If the bank is unable to use tying,what is the profit-maximizing price to charge for unlimited use of an ATM card?

Assume that demand for a product that is produced at zero marginal cost is reflected in the table below. a.What is the profit-maximizing level of production for a group of oligopolistic firms that operate as a cartel? b.Assume that this market is characterized by a duopoly in which collusive agreements are illegal.What market price and quantity will be associated with a Nash equilibrium?

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?

In choosing among alternative courses of action,Raj must consider how others might respond to the action he takes.In the language of game theory,we say that Raj must think

In the U.S.government's 1998 suit against the Microsoft Corporation,a central issue was whether Microsoft should be allowed to integrate its Internet browser into its Windows operating system.Microsoft responded that

The primary purpose of antitrust legislation is to

Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc.(CSS Inc.) and Wal-Mart.Which of the following will always be true?

When price is above marginal cost,selling one more unit at the current price will increase profit.This concept is known as the

The paradoxical nature of oligopoly can be demonstrated by the fact that,even though the monopoly outcome is best for the oligopolists,

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?

Which of the following statements is (are) true of the prisoners' dilemma? (i) Rational self-interest leads neither party to confess. (ii) Cooperation between the prisoners is difficult to maintain. (iii) Cooperation between the prisoners is individually rational.

A dominant strategy is one that

A group of firms that act in unison to maximize collective profits is called a