Econ Chapter 13 & 14 HW review

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The firm's profit-maximizing price will be

$16

Oligopolistic industries are characterized by

a few dominant firms and substantial entry barriers

The term oligopoly indicates

a few firms producing either a differentiated or a homogeneous product

A cartel is

a formal agreement among firms to collude

Refer to the diagram, in short-run equilibrium, the monopolistically competitive firm shown will set its price

above ATC

In the long run, a profit-maximizing monopolistically competitive firm sets its price

above marginal cost

Excess capacity refers to the

amount by which actual production falls short of the minimum ATC output

In short-run equilibrium, the monopolistically competitive firm shown sets its price

below ATC

Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If Alpha and Beta agree to a high-price policy through collusion, the temptation to cheat on that agreement is demonstrated by the fact that

beta can increase its profit by lowering its price

The Nash Equilibrium in the game shown in Table 12.2 is the cell in which

both firms choose a low price

Game theory can be used to demonstrate that oligopolists

can increase their profits through collusion

The Organization of Petroleum Exporting Countries (OPEC) is an international cartel. If the cartel were to hire a consulting firm to monitor the production rates of member countries, the economic reason for the monitoring would be to

detect those member countries that are depressing prices by producing more than their assigned quotas

Refer to the diagrams, which pertain to monopolistically competitive firms. Long-run equilibrium is shown by

diagram a only

Refer to the diagrams, which pertain to monopolistically competitive firms. A short-run equilibrium entailing economic profits is shown by

diagram b only

Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If both firms follow a high-price policy

each will realize a $20 million profit

In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will

exceed MC but equal ATC

In the long run, economic theory predicts that a monopolistically competitve firm will

have excess production capacity

A monopolistically competitive firm's marginal revenue curve

is downsloping and lies below the demand curve

An industry having a four-firm concentration ratio of 30 percent

is monopolistically competitive

The demand curve facing an oligopoly firm is kinked because

it is most likely that rivals will match price cuts but not price increases

Monopolistic competition is characterized by a

large number of firms and low entry barriers

In the short run, the price charged by the monopolistically competitive firm attempting to maximize profits

may be either equal to ATC, less than ATC, or more than ATC

The demand curve of a monopolistically competitive producer is

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor

Which of the following is a unique feature of oligopoly?

mutual interdependence

Refer to the data, the Herfindahl index for the industry is

1,800

Refer to the data, if all the firms in the industry merged into a single firm, the Herfindahl index would become

10,000

The Herfindahl index for a pure monopolist is

10,000

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing ouput for this firm will be

160

Answer the question on the basis of the following demand and cost data for a specific firm If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be

8 units

Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. Without collusion Nash equilibrium is represented by which cell?

A

Refer to the payoff matrix, Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. If this is a one-time simultaneous game, which cell represents the final outcome we would expect to occur?

A

Suppose that currently there are no airlines serving the city of South Podunk. Both Accommodating Airlines and Friendly Flyers are looking to enter that market. (They are the only two) The figure shows in extensive form the possible outcomes of the two firms' decisions. The payoffs represent, the thousands per month, the profit (or loss), the firm will realize from its decision. What does this extensive form game indicate about the decision to enter the South Podunk market?

Both airlines are better off by entering this market

Refer to the above payoff matrix for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation?

Both firm A and B choose the low price

The diagram shows the extensive form version of a strategic game between the two nationally dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are considering opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit (or loss) the firm will realize its decision, what does this extensive form game indicate about the decision to open a new coffee shop?

Corporate Coffee has a first-mover advantage

Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. With collusion and no cheating, the outcome of the game is cell

D

Refer to figure 25.1 for an oligopoly firm. The existing price and quantity are $10 and 2,000 units. If we assume that rival firms match price decreases but not price increases, the firm's demand curve will most likely be (from left to right)

D2ED1

When a monopolistically competitive firm is in long-run equilibrium

MR = MC and p > minimum ATC

Which of the following is correct, for a monopolistically competitive firm in long-run equilibrium?

P exceeds minimum ATC

Monopolistic competition is characterized by firms

producing differentiated products

The kinked-demand model of oligopoly assumes that

rivals will ignore price increases but will match price cuts

In some games, one player or firm moves first and commits to a strategy to which the rival player subsequently respond. Such games are called

sequential games

The so-called first-mover advantage may be observed in

sequential games

A game where players choose their strategies at the same time is called a

simultaneous game

In game theory, a repeated game is one

that recurs more than once between two players

Other things equal, if more firms enter a monopolistically competitive industry

the demand curves facing existing firms would shift to the left

If the four-firm concentration ratio for industry X is 80,

the four largest firms account for 80 percent of total sales

If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models?

the pure monopoly model

The kinked-demand curve model helps to explain price rigidity because

there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price

Monopolistically competitive industries are inefficient because

they are overpopulated with firms whose plants are underutilized

In the long run, the price charged by the monopolistically competitve firm attempting to maximize profits

will be equal to ATC