Exam 15: Oligopoly

Suppose that two clothing manufacturers, Frederick's Fashions and Stephan's Styles, announce that they plan to merge. The Herfindahl-Hirschman index is currently 1,500. After the merger, the HHI will rise to 1,560. This market is

A trigger strategy can be used in

Kellogg's and General Mills are two of the dominant breakfast cereal manufactures in the U.S. Each firm can either sign or not sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box. If both companies sign an athlete, they will each make $5 million in economic profit. If only firm signs, they earn $8 million in economic profit and the other firm incurs an economic loss of $1 million. If neither firm signs, they break even. What is the outcome of this game if it is only played once?

Sears -Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is true?

Suppose two firms, FastNet and SmartCast are the only fast Internet providers in a city. They have identical costs and one firm's service is a perfect substitute for the other's. The industry is a natural duopoly. Suppose that FastNet and SmartCast collude and agree to share the market equally. -In the scenario above, which of the following actions will maximize the industry's economic profit?

Russia, Iran and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel on natural gas. What is the goal of a cartel?

Does an oligopoly produce the efficient quantity of output or does it create a deadweight loss? Do the firms want to produce the efficient quantity of output? Explain your answer.

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period, but the player cheats in the current period if the other player cheated in the previous period is called a

Collusive agreements tend to break apart because the incentive to cheat is so great.

In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a ________ equilibrium.

The practice of the only seller in a market charging a price at the highest level that would still inflict a loss on a new entrant into the market is called

What is the real dilemma facing the prisoners in the prisoners' dilemma game?

The Sherman Act,

In 2008, a former Intel engineer has been charged with stealing trade secrets worth $1 billion. Intel owns 80 percent of the worldwide market for microprocessors, AMD has the rest. The microprocessor market is most like an example of:

The key feature of an oligopoly is that there

In a contestable market with one firm in the market, the existing firm will

A market with one or a small number of firms but no barriers to entry is known as

Kellogg's and General Mills are two of the dominant breakfast cereal manufactures in the U.S. Each firm can either sign or not sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box. If both companies sign an athlete, they will each make $5 million in economic profit. If only firm signs, they earn $8 million in economic profit and the other firm incurs an economic loss of $1 million. If neither firm signs, they break even. Which of the following pairs of payoffs would NOT appear together in a square of the payoff matrix?

The maximum total economic profit that can be made by colluding duopolists

Gap -Ann Taylor and Gap are two clothing companies that must decide on the leading color palette for next season. Their sales depend on the choice of color they make as well as the choice their competitor makes. Their sales are summarized in the payoff matrix above. Using the payoff matrix,