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
