Chapter 12

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If a firm perceived that the other firm in an implicit pricing agreement dropped its price in an attempt to gain market share, then its most likely response would be to

engage in price war

Oligopoly differs from monopoly and perfect competition in that

firms consider each others actions when choosing price and quantity, there are a few firms in the industry, firms act strategically

True things about Cartels

firms in cartel often charge the same price for a particular good or service, if two firms form a cartel they could charge the same price as a monopolist, a cartel could be made up of as few as two firms

True things about the oligopolistic market structure

a few firms serve the market, economies of scale in production, a firm may carry out a big advertising campaign

In general, firms in a cartel

agree to charge the price the monopolist would charge

The rational outcome of a guaranteed matching or 'meet the competition' policy is that

both firms will sell at the high price

if there is a legitimate threat of entry into a market, then the market is said to be

contestable

A firm announces that it will refund the difference between its price and any price of a competitor that is lower. This is an example of

guaranteed price matching

In general, the quantity of output in a monopoly market is

lower than an oligopoly

In a kinked demand model, that part of the demand curve below the kink is

more inelastic than the region above the kink

The four firm concentration ratio measures the

percentage of market output produced by the four largest firms

If two firms use a tilt-for-tat scheme to maintain cartel pricing and one firm chooses a low price in the current time period then

the other firm will choose a low price in the next time period

if the price in a oligopoly market is the same as that of a monopoly market with identical cost and demand conditions then

there may be a collision between firm

What makes a grim trigger strategy 'grim' is

If one player underprices, then the other player drops the price so far that profits for both firms are zero forever


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