Exam 15: Using Noncompetitive Market Models

Suppose that the elasticity of demand at a competitive equilibrium is 2.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,one can conclude that the monopoly output is _____ percent below of the competitive output.

The following payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff. Table 15-1 -Refer to Table 15-1.If X = 145 and Y = 62,it is evident that _____.

Which of the following is true of a natural monopoly?

In most models of oligopoly _____.

Until 1992,WordPerfect produced the dominant word processing system for the personal computer [PC] platform.After 1992,Microsoft's Word for Windows dominated the PC platform,largely by offering consumers a better program at a much lower price.This example illustrates:

The following figure shows the marginal cost [MC],marginal revenue [FH] and demand [FG] curves for a monopolist who faces constant costs. Figure 15-1 -Refer to Figure 15-1.If the regulator sets a maximum price of P₂,the monopolist's demand curve is _____.

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff. Table 15-2 -In Table 15-2,company B's strategy of choosing a _____ price is iteratively dominated by a strategy of _____ price.

( A)Define and illustrate graphically average-cost pricing and marginal-cost pricing.

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs. Figure 15-2 -Suppose that the market in Figure 15-2 were served by an oligopoly such that the equilibrium output was 450.Then the welfare loss would be _____ as compared to the welfare loss of _____ under monopoly.

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies. Table 15-3 -Refer to Table 15-3.What is the highest payoff in Costello's dominated strategy?

Deadweight losses due to monopoly include:

Refer to Figure 15-1.Under competitive conditions,what is the equilibrium price and output?

The value of the difference between price and marginal cost is a measure of profit per unit only if:

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff. Table 15-2 -In Table 15-2,company A's strategy of choosing a _____ price is dominated by a strategy of _____ price.

Antitrust laws state that the practice of predatory pricing is illegal as it allows the firm to consolidate monopoly power by driving other firms out of the market.What might be the challenges that a regulator may face while trying to prosecute a firm that is said to practice predatory pricing? (Predatory pricing is a pricing strategy where a firm prices a product below average variable cost (or short-run marginal cost)to drive rival firms out of the market)

Increasing competition in a market characterized by natural monopoly would:

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies. Table 15-3 -Refer to Table 15-3.When the concept of iterated dominance is used,Abbott and Costello will:

Which of the following is necessary for a Nash equilibrium in a two-player game where both players have three strategies each?

Why are the estimates of the deadweight loss of monopoly not large?

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies. Table 15-3 -Refer to Table 15-3.What is Abbott's dominant strategy?