Chapter 10 Micro

assumes that each player chooses his or her best strategy.

A Nash equilibrium:

$11

Advanced Printing Systems is a firm in a monopolistically competitive market. If it is selling its product at $11 at the equilibrium quantity and earning normal profit, what is its long-run average total cost?

$18

Advanced Printing Systems is a firm in a monopolistically competitive market. If its marginal cost is $18 per unit in the short run, if it is maximizing profits, and if it is selling at the equilibrium quantity, what is its marginal revenue?

a strategy

Amco Airlines decides to increase advertising expenditures in response to UN Airlines' advertising campaign. In game theory, this response is

an oligopoly.

An industry with a few large firms is

do nothing.

Fat's Meats is in an oligopoly market. According to the kinked demand curve model, if it raises its prices to increase profit, its competitors will

Fat's Meats could cheat and sell more kielbasa than it agreed to.

Fat's Meats is part of the cartel that controls the kielbasa industry. Which of the following would cause instability in this cartel?

mathematics and simulation

Game theory is an approach that uses

grim trigger

If Nintendo lowers the price of its product by $10, Sony responds by lowering the price of its own product by $10 and chooses not to cooperate again. This is an example of what type of game strategy?

trembling hand trigger

If Nintendo lowers the price of its product by $10, Sony waits to see whether Nintendo's price cut was a temporary mistake. This is an example of what type of game strategy?

Rosco's demand curve will shift to the right.

If Rosco's Tacos competes with eight other fast-food restaurants in the same neighborhood, and two of those rival firms exit the market, then:

differentiated products

If a cartel member is considering cheating in order to earn profits, it should

exit; increasing

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _____ the industry, _____ demand until each firm earns a normal profit.

take their competitors into account when they make pricing decisions.

In an oligopoly, all the firms

Jesse plays Down and Katy plays Left.

In the game table represented above, the dominant strategies are

Down, Left = (6, 5)

In the game table, the Nash equilibrium is

Both will advertise.

Joe's Diner and Bev's Drive Thru, two competing restaurants, are considering whether to advertise. Each cell in the following table shows Bev's payoffs on the left and Joe's on the right, depending on their decisions. They play only once, choose at the same time, and have perfect information about the payoffs. Based on the table, what is the likely outcome?

$12

PIP Printing Systems is a firm in a monopolistically competitive market. If it is selling its product at $12 at the long-run equilibrium quantity, what is its long-run average total cost?

a trembling hand trigger strategy

Suppose that Subway and Quiznos both charge $7 for their foot-long sandwiches. Subway reduces the price of its foot-long sandwiches to $5. Quiznos waits to see the impact of its competitor's lower price before it responds. This is an example of:

produce the same quantity and charge the same price unless marginal cost moves out of the range of discontinuity in marginal revenue.

Suppose that a firm in an oligopoly market faces a kinked demand curve. If its marginal cost decreases by a small amount

cooperative game.

The industrial structure of cartels is an example of a(n):

tit-for-tat strategy

The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a(n):

increase government protection

Which action can help increase the stability of a cartel?

Products of individual firms are different.

Which characteristic does monopolistic competition NOT have in common with perfect competition?

a game of chicken in which one player backs down while the other player does not

Which game does NOT describe a Prisoner's Dilemma outcome?

All of the firms agree upon a specific price and output for their products.

Which of the following describes a cartel?

not doing anything the first time an enemy attacks and waiting to see what it will do next

Which of the following is a trembling hand trigger strategy?

garments sold to a retail customer

Which of the following products is likely to be the MOST differentiated?

game theory

_____ is the study of how individuals and firms make strategic decisions to achieve their goals when other parties or factors can influence that outcome.

they have some market power.

Because monopolistically competitive firms sell differentiated goods:

an oligopoly.

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is

both Boeing and Airbus will cheat

Boeing and Airbus can either comply with a cartel agreement or cheat. Based on the table, if this game is only played once, and each firm plays rationally: