Exam 15: Using Noncompetitive Market Models

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.Given that P₁= $100,P₂ = $50,Q₂= 2,000 units,and Q₁=1,000 units,what is the deadweight loss of a monopoly?

In game theory,the concept of _____ can be used to arrive at an equilibrium in a game with no dominant strategies.

In order to maximize profits,firms must produce at the lowest possible cost.However when producing at a cost that is higher than necessary:

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 Abbott chooses the high-pricing strategy,Costello's highest possible profit is:

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 Costello chooses the low-pricing strategy,Abbott's highest possible profit is:

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -Refer to Figure 15-3.If the firm practices marginal-cost pricing,the equilibrium price would be _____.

Refco is company that manufactures parts of a car engine for two major car manufacturers.It decides to shut down an assembly line that produces parts that are specially tailored for one of the car manufacturers.The other manufacturer then increases its order for parts made by Refco.In this example,Refco was practicing a _____.

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -In Figure 15-3,if the maximum price allowed is P₁,the firm will produce a quantity equal to_____.

One of the practical difficulties in regulating a natural monopoly using average-cost pricing is:

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -In Figure 15-3,under marginal-cost pricing,a firm would require a government subsidy of at least _____ to remain profitable.

A natural monopoly is defined as an industry in which:

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -In Figure 15-3,if the monopoly is forced to use the average-cost pricing policy,it would:

Which of the following is true of monopolies and their incentive to innovate?

What is meant by iterated dominance?

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 -Refer to Figure 15-2.Since there is a positive deadweight loss from monopoly,which of the following statements must be true?

Which of the following is not a problem associated with regulation of a natural monopoly?

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 -Refer to Table 15-2.Which of the following is true?

Which of the following statements correctly identifies the problem with regulating a natural monopoly?

Which of the following is not a problem faced by regulators while regulating a natural monopoly such as cable television or electric utility company?

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 -Refer to Table 15-2.Using iterated dominance,one can conclude that in equilibrium: