Exam 15: Oligopoly and Game Theory

For many years the International Tin Council, a cartel made up of 22 leading tin-producing and tin-consuming nations, was able to keep the world price of tin high by restricting supply. Recently, however, the cartel collapsed due to a decrease in demand for tin and an increase in production by non-cartel countries. The decrease in demand for tin came mainly as manufacturers began to use more plastics and other metals in their production. Explain why a cartel that was so successful for many years all of a sudden faced this type of collapse.

One sign of the cartel power of the NBA is the use of salary caps.

The pursuit of market power reduces the social good.

In a cartel, the most profitable outcome is achieved by:

Governments:

Most radio stations broadcast their programming at no cost to the listener. How can they do this? What role does advertising play? Would radio stations be more profitable if they could instead charge listeners a subscription fee for listening to their station?

Asphalt firms between 2005 and 2007 in Kentucky are an example of tactic collusion.

Bidding on asphalt jobs is a prisoner's ______ outcome.

Which of the following best explains why cartel agreements are hard to maintain?

Strategic decision making is decision making in situations that are interactive.

With price matching plus 10% of the difference the equilibrium will occur when:

If your economics class was graded on a curve and everyone agrees to study only half as much, everyone would get the same grade that they otherwise would earn. You, however, will earn an A if you study more than the others, a C if you study the same amount as others, and an F if everyone else studies more than you. You don't like studying, but you'd rather study and get an A than get a C without studying, or study and get a C than get an F without studying. All the students in your class get together and agree not to study, but have no way of verifying if anyone does study. Do you think that this cartel will succeed?

Cartels tend to lose their power due to the cheating by the cartel members.

Cartels are more successful when:

Which of the following makes a cartel short-lived?

When OPEC raises prices, it encourages new firms to enter the industry and new technologies to be developed that help to conserve oil.

Cartels are typically easy to maintain since each firm in the cartel is earning above normal profits.

The milk industry in the United States:

A cartel is a group of firms that try to monopolize the market.

In the prisoner's dilemma, the dominant strategy is: