Exam 14: Oligopoly

An industry is made up of five firms.Three of the firms make up 20% of the total market sales,one firm makes up 25%,and the remaining firm makes up 15%.What is the HHI for this industry?

Use the following to answer questions : Figure: Payoff Matrix for Jake and Zoe -(Figure: Payoff Matrix for Jake and Zoe)Use Figure: Payoff Matrix for Jake and Zoe.Jake and Zoe are the only producers of slushies in their tourist town.Every week,each decides whether to price high or price low for the following week.The figure shows the profit per week earned by their two firms.Suppose the firms each decide to price high initially and adopt a tit-for-tat strategy for the following weeks.After a few weeks,Jake's weekly profit would be _____ and Zoe's weekly profit would be _____.

The purpose of the Sherman Antitrust Act was to encourage the establishment of monopolies to replace trusts.

Suppose that each of two prisoners has the independent choice of confessing to a crime or not confessing to a crime they were both alleged to commit.If neither confesses,both spend 2 years in prison;if both confess,both spend 3 years in prison.If one confesses and the other does not,the confessor gets off with 1 year but the other gets 6 years.According to game theory,the MOST likely strategy of the prisoners is that:

Use the following to answer questions : $\begin{array}{l}\text { Table: Demand for Crude Oil }\\\begin{array} { c c c } \text { Quantity } & \begin{array} { c } \text { Price } \\\text { (\$/barrel) }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue (\$) }\end{array} \\\hline 0 & \$ 160 & \$ 0 \\10 & 150 & 1500 \\20 & 140 & 2800 \\30 & 130 & 3900 \\40 & 120 & 4800 \\50 & 110 & 5500 \\60 & 100 & 6000 \\70 & 90 & 6300 \\80 & 80 & 6400 \\90 & 70 & 6300 \\100 & 60 & 6000 \\110 & 50 & 5500 \\120 & 40 & 4800 \\130 & 30 & 3900 \\140 & 20 & 2800 \\150 & 10 & 1500 \\160 & 0 & 0\end{array}\end{array}$ -(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil.Assume that the crude oil industry is a duopoly and the marginal and fixed costs of producing crude oil equal zero.Suppose that the two firms are maximizing industry profit and splitting the profit evenly.If firm 1 decides to cheat and increase production by 10 more barrels,it will earn profits of:

To limit competition,oligopolists often practice product differentiation.

Use the following to answer questions : Figure: Payoff Matrix for Gehrig and Gabriel -(Figure: Payoff Matrix for Gehrig and Gabriel)Use Figure: Payoff Matrix for Gehrig and Gabriel.The figure describes two people who sell handmade Carey Price figurines in Montreal.Both Gehrig and Gabriel have two strategies available to them: to produce 5 000 figurines each month or to produce 7 000 figurines each month.The combined profits of the two are maximized if Gehrig produces _____ figurines and Gabriel produces _____ figurines.

The pattern of behaviour in which one company tacitly sets prices for the industry as a whole is known as product differentiation.

The Herfindahl-Hirschman index is a measure of concentration found by:

In the Canadian economy,oligopoly is rare.

Use the following to answer questions : Table: Demand Schedule of Gadgets Price of a Gadget Quantity of Gadgets Demanded \ 10 0 9 100 8 200 7 300 6 400 5 500 4 600 3 700 2 800 1 900 0 1000 -(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets with no marginal cost or fixed cost.If these two producers formed a cartel and acted to maximize total industry profits,total industry profit would be:

The FIRST law designed to curb monopoly power in the United States was the _____ Act.

Use the following to answer questions : Figure: Monopoly Profits in Duopoly -(Figure: Monopoly Profits in Duopoly)Use Figure: Monopoly Profits in Duopoly.The figure shows how an industry consisting of two firms that face identical demand curves (D₁)can collude to increase profits.Which assumption is NOT a part of the analysis illustrated by the model?

Maximization of joint profits is MOST likely when firms are:

Use the following to answer questions : Table: Two Rival Gas Stations Speedy Gas High Price Low Price Swifty Gas High Price \ 100,\ 100 \ 25,\ 150 Low Price \ 150,\ 25 \ 50,\ 50 -(Table: Two Rival Gas Stations)Use Table: Two Rival Gas Stations.The table shows a payoff matrix for two gas stations in a small town.Each firm can set either a high price or a low price,and customers view these two firms as nearly perfect substitutes.Profits in each cell of the payoff matrix are given as (Swifty's profit,Speedy's profit).Which statement describes a dominant strategy?

As the number of firms in an oligopoly decreases:

Use the following to answer questions : Table: Demand for Solar Water Heaters Price Quantity \ 1400 30 1300 35 1200 40 1100 45 1000 50 900 55 800 60 700 65 -(Table: Demand for Solar Water Heaters)Use Table: Demand for Solar Water Heaters.The marginal cost of producing solar water heaters is zero,and only two firms,Rheem and Calefi,produce them.Suppose they agree to produce only 25 water heaters each.If Rheem cheats on the agreement and produces 30 water heaters,what is the price effect for Rheem?

Use the following to answer questions : Figure: Monopoly Profits in Duopoly -(Figure: Monopoly Profits in Duopoly)Use Figure: Monopoly Profits in Duopoly.Suppose there are two firms in this industry.Each firm faces an identical demand curve,D₁, and the market demand curve is D₂.The figure illustrates how firms can reap monopoly profits,even in an industry with:

Use the following to answer questions : $\begin{array}{l}\text { Table: Demand for Crude Oil }\\\begin{array} { c c c } \text { Quantity } & \begin{array} { c } \text { Price } \\\text { (\$/barrel) }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue (\$) }\end{array} \\\hline 0 & \$ 160 & \$ 0 \\10 & 150 & 1500 \\20 & 140 & 2800 \\30 & 130 & 3900 \\40 & 120 & 4800 \\50 & 110 & 5500 \\60 & 100 & 6000 \\70 & 90 & 6300 \\80 & 80 & 6400 \\90 & 70 & 6300 \\100 & 60 & 6000 \\110 & 50 & 5500 \\120 & 40 & 4800 \\130 & 30 & 3900 \\140 & 20 & 2800 \\150 & 10 & 1500 \\160 & 0 & 0\end{array}\end{array}$ -(Table: Demand for Crude Oil)Use Table: Demand for Crude Oil.Assume that the crude oil industry is a duopoly and the marginal and fixed costs of producing crude oil equal zero.Suppose that the two firms are maximizing industry profit and splitting the profit evenly.If both firms engage in noncooperative behaviour,the industry output will be _____ barrels,and the price of crude oil will be _____.

For approximately the past 20 years,the European Union has enforced antitrust policies for its member countries.