Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 14, Problem 1.3P
To determine
Classify contestable markets.
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What are the characteristics of an oligopoly? Choose all that apply.
A. One particular product or service has no substitute.
B. A few large sellers exist.
C. Only one seller exists.
D. Products and services tend to be identical or similar.
Economics
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Anna, Bill, and Charles are competitors in a local market, and each is trying to decide whether it is worthwhile to advertise, If all of
them advertise, each will earn a profit of $5000. If none of them advertise, each will earn a profit of $8000, If only one of them
advertises, the one who advertises will earn a profit of $10,000 and the other two will each earn $2000. If two of them advertise,
those two will each earn a profit of $6000 and the other one will earn $1000. If all three follow their dominant strategy, what will
Anna do, and how much will she earn?
Select one:
a. Anna will advertise and earn $5000.
b. Anna will advertise and earn $6000.
C. Anna will not advertise and will earn $8000,
d. Anna will advertise and earn $10,000.
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Chapter 14 Solutions
Principles of Economics (12th Edition)
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- Which of the following apply to oligopoly industries? Select one or more answers from the choices shown. a. A few large producers. b. Many small producers. c. Strategic behavior. d. Price taking.arrow_forwardis an organization created a formal agreement between a group of producers of a good or service, to regulate supply in an effect to regulate or manipulate prices. Select one: a. Oligopoly. b. Cartel. c. Perfect competition. d. Monopoly.arrow_forwardOligopoly Game Theory X's possible prices $40 $35 $57 $59 $60 $55 $50 $55 $69 $58 a. Use the payoff matrix to explain the mutual interdependence that characterizes oligopolistic industries. b. Assuming no collusion between X and Y, what is the likely pricing outcome? c. In view of your answer to b, explain why price collusion is mutually profitable. Why might there be a temptation to cheat on the collusive agreement? Answer: Y's possible prices $35arrow_forward
- Writing a teaching note about the simple duopoly/oligopoly competition models with homogeneous goods markets.Explain the following models in detail: (1) Cournot-Nash; (2) Stackelberg; (3) Bertrand competition models. For each model, present the following:a. History and Background: Who are the people that give the name to the models? When/where did they live/work? What is the main publication that they presented their work in?b. Math: Present the math and the solution framework of each model. Show theoptimization outcomes with 2 companies.c. Computer implementation: Implement the solution of each model in Python. Show an example output.d. Discuss 1: What are the main differences across the models? Explain.e. Discuss 2: Are there any circumstances or economic dynamics that you would prefer a Monopoly over a Competitive industry as a policy maker? If yes, why; or if no, why? Present argument(s) and example(s)arrow_forwardAn oligopoly takes into account the decisions made by other companies before lowering its price.. true or falsearrow_forwardAl and Bill operate the only two barber shops in a small town. They might try to form a cartel to charge a high price for hair cuts. The payoffs represent their daily from charging high and low prices. Al's Barber Shop a. b. C. High price Low price d. Bill's Barber Shop High price A $125 $200 Which cell represents a Nash equilibrium? a. C. Low price BA $125 $50 $50 $75 b. d. B $200 $75arrow_forward
- Which market structure shown below would be expected to maximize consumer surplus? A. Monopoly B. Oligopoly C. Perfectly Competitivearrow_forward1. How might advertising make markets less competitive? How might it make markets more competitive? 2. Explain two benefits that might arise from the existence of brand names. 3. If the oligopoly members agree on a total quantity to produce, what quantity would they choose? Why? 4. What does the prisoners' dilemma teach us about oligopolies?arrow_forwardPrice competition in an oligopoly leads to a high probability of : a. higher prices b. price collusion c. a government regulated price d. a price war Help!arrow_forward
- Which of the following is the primary reason an oligopoly is not a pure price maker? A. Dominant pricing strategy B. Product differentiation C. Dependent on pricing decisions of competitorsarrow_forwardWhat are the types of the oligopoly market??arrow_forwardWhy do oligopolies exist? List five or six oligopolists whose products you own or regularly purchase. What distinguishes oligopoly from monopolistic competition?arrow_forward
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