1. is a theory of oligopoly in which oligopolistic firms act as if there were is an organization of firms that reduces output only one firm in the industry. A and increases price in an effort to increase joint profits. 2. There are four problems associated with cartels: a. The problem of_ incentive to be a free rider, stand by and take a free ride on the actions of others. because it is costly and because there is an because reaching agreement on how b. The problem of much each firm should reduce output may be difficult. c. The problem of because if members agree on policy that generates high profits, other firms may want to join, which could cause the cartel to breakup. d. The problem of_ 3. A firm who is currently operating in long-run competitive equilibrium, would earn profits. The firm agrees to join a cartel and as a result reduces its output and raises its price

1. is a theory of oligopoly in which oligopolistic firms act as if there were is an organization of firms that reduces output only one firm in the industry. A and increases price in an effort to increase joint profits. 2. There are four problems associated with cartels: a. The problem of_ incentive to be a free rider, stand by and take a free ride on the actions of others. because it is costly and because there is an because reaching agreement on how b. The problem of much each firm should reduce output may be difficult. c. The problem of because if members agree on policy that generates high profits, other firms may want to join, which could cause the cartel to breakup. d. The problem of_ 3. A firm who is currently operating in long-run competitive equilibrium, would earn profits. The firm agrees to join a cartel and as a result reduces its output and raises its price

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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consider the market for oil. Suppose for simplicity that there are only two oil roducing countries-Saudi Arabia and Kuwait. Both countries must choose hether to produce a low output or a high output. These output strategies with corresponding profits are depicted in the ayoff matrix to the right. Kuwait's profits are in red and Saudi Arabia's are in blue. Kuwait Suppose the two countries form a cartel. What is the cooperative equilibrium? Low Output High Output O A. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output. $125 $75 Low Output $8 $13 O B. A cooperative equilibrium does not exist for this game. O C. The cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a high output. Saudi Arabia $98 $70 O D. The cooperative equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a low output. High Output $5 $8 O E. The cooperative equilibrium is for Saudi Arabia to produce…
What is an oligopoly and how do firms behave and conduct themselves in this market structure? What are cartels and what is a really famous cartel in the oil industry? What is game theory and describe in detail the different games discussed in the textbook. What is the Nash Equilibrium and why is it so often the strategy chosen by a player?
5. Duopolist firms 1 and 2 compete on price with some market differentiation. Demand for firm ie{1, 2} is q, = 2 – 2p, + p, Neither firm has costs. a. Find the best response functions for each firm in the static game. b. Find the unique Nash equilibrium prices in the static game. c. Are prices strategic complements or strategic substitutes? Briefly explain. d. Does Firm 1 want Firm 2 to increase or decrease p,?
6 Company X, Company Y, and Company Z have formed an oligopoly. Company X raises its prices, but Company Y and Company Z do not. Which of the following will likely occur? A Company Y and Company Z will form a duopoly. BO The sales of Company X will decline slightly. CO The sales of Company X will decline sharply. DO Company X will have significant, sustained profit increases.
Why do oligopolies exist? Do oligopolies exist due to ? a. market failure b. barriers to entry c. economic profit d. intense competition
Chapter 14: Oligopoly 1 23.Explain how the outcome of the Cournot model is achieved. 24.An essential assumption of the Cournot model is that each firm aims to maximize profits, based on the expectation that its own output decision will not have an effect on the decisions of its rivals. Critically evaluate this assumption. 25.In choosing the optimal output, the monopolist had only to consider its own costs and the demand curve that it faced. How do things change under duopoly and what does the Cournot model argue about how firms will behave? 26.What is the output level predicted by the Cournot model? Discuss this in terms of the different market models that have been surveyed so far. 27.Evaluate the following statement. The Cournot model basically assumes that the sole decision of each firm in a duopoly is one of determining how much to produce not which price to set. 28.What is price leadership?
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14. Aside from advertising, how can monopolisticallycompetitive firms increase demand for their products? 17. Would you expect the kinked demand curve to bemore extreme (like a right angle) or less extreme (like anormal demand curve) if each firm in the cartel producesa near-identical product like OPEC and petroleum?What if each firm produces a somewhat differentproduct? Explain your reasoning.
What is the minimum number of firms required for an industry to be an oligopoly? a. many b. 100 c. 1 d. 3
24 If oligopolies compete hard against each other, which of the following will likely occur? A They will start acting like imperfect competitors. They will start acting like monopolistic competitors. The costs for all will be driven up. DO They will all experience zero profits.
Its in the picture.
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