Question 1

When is a game dominance solvable?

Accepted Answer

The answer of When is a game dominance solvable?...

Question 2

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .If the market demand curve D rotates outward (while its vertical intercept remains unchanged), which of the following changes will be observed in the oligopoly market?

Accepted Answer

A) The fringe's market share will decline 
B) The dominant firm's profits will decrease 
C) The marginal cost will decrease 
D) The overall market price will decline

Question 3

Why do competitive firms enter the market in spite of the price war threatened by the dominant firm?

Accepted Answer

The answer of Why do competitive firms enter the market...

Question 4

In games without dominant strategies the Nash equilibrium can be found by using:

Accepted Answer

A) the cooperation vs.grim trigger strategy. 
B) the chain-store paradox. 
C) the principle of backward induction. 
D) the method of iterated elimination of dominated strategies.

Question 5

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .What will be the dominant firm's profit maximizing output?

Accepted Answer

A) 1 unit 
B) 2 units 
C) 2.6 units 
D) 0.6 unit

Question 6

In a Betrand price-setting duopoly model, the equilibrium output:

Accepted Answer

A) will be equal to the monopoly output. 
B) will be equal to the competitive market output. 
C) will lie between the monopoly and the competitive market output. 
D) will be higher than the monopoly output.

Question 7

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .If the supply curve of the fringe SF becomes steeper, which of the following changes will be observed in the oligopoly market?

Accepted Answer

A) The residual demand curve DRES will become less elastic 
B) The dominant firm's profits will decrease 
C) The fringe's profit will decrease 
D) The dominant firm's market share will decrease

Question 8

Post deregulation, airlines attempted to maintain their earlier profit levels by instituting price discrimination in such forms as advance purchase ticket restrictions and frequent-flyer mileage programs.These methods generally did not succeed in maintaining those profit levels.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the market demand curve (D) in an oligopoly market characterized by a dominant firm and a fringe is given by Q = 25 - 2P.The fringe supply curve is given by QF = -1 + 0.3P.If the marginal cost of production for the dominant is $3, calculate the market price and total output produced by the dominant firm and the fringe.

Accepted Answer

A) Q = 14.42 units and P = $8.64 
B) Q = 10.69 units and P = $7.15 
C) Q = 12.69 units and P = $6.5 
D) Q = 8.74 units and P = $5.15

Question 10

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .Assume that in the long run new firms enter the market lowering the total cost incurred by the fringe firms below the same incurred by the dominant firm.Which of the following situations will arise?

Accepted Answer

A) The fringe supply will rotate leftward and downward reducing its profit. 
B) The dominant firms market share and profit will both increase. 
C) The dominant firm will be totally displaced by the fringe. 
D) The fringe's market power will decrease.

Question 11

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .What will be the fringe's profit maximizing output?

Accepted Answer

A) 0.6 unit 
B) 0.3 unit 
C) 1.6 units 
D) 2.6 units

Question 12

The following matrix represents the payoffs to two producers, each making a strategic choice either to keep the output at 5 units or at 10 units.

-Refer to Table 7-1.Which of the following output combinations represents the dominant strategy of the two players?

Accepted Answer

A) Each player produces 5 units of output. 
B) Player A produces 5 units and Player B produces 10 units. 
C) Player A produces 10 units and Player B produces 5 units. 
D) Each player produces 10 units of output.

Question 13

In an oligopoly market with a dominant firm and a competitive fringe, if market demand is _____, the market price will be low and the _____ profit will be small.

Accepted Answer

A) less elastic; fringe's 
B) less elastic; dominant firm's 
C) more elastic; fringe's 
D) more elastic; dominant firm's

Question 14

How is the dominant firm's residual demand curve derived in an oligopoly market?

Accepted Answer

The answer of How is the dominant firm's residual demand...

Question 15

In an ascending value auction, a bidder attempts to win a certain object by bidding a price below his valuation but higher than anyone else's bid.

Accepted Answer

A) True 
 B)False

Question 16

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .If the dominant firm decides to maximize the present value of his future profits and threatens a price war:

Accepted Answer

A) new firms will not enter the oligopoly market. 
B) new firms will enter the oligopoly market. 
C) the market share of the existing fringe would increase. 
D) the market share of the dominant firm would increase.

Question 17

Explain the concept of Nash equilibrium with an example.

Accepted Answer

The answer of Explain the concept of Nash equilibrium with...

Question 18

When can a grim trigger prevent oligopolists from breaking an agreement?

Accepted Answer

The answer of When can a grim trigger prevent oligopolists...

Question 19

The figure given below represents the output choices of each of the two oligopolists, given the choices of its competitor.QA and QB are the quantities of output produced by Producer A and Producer B.The marginal cost of production is zero for both producers.

-Refer to.If Producer A and Producer B act as a price-takers what will be the total output produced in the market?

Accepted Answer

A) 12 units 
B) 6 units 
C) 4 units 
D) 2 units

Question 20

In the Stackelberg leadership model,

Accepted Answer

A) the leader earns a larger profit compared to the follower. 
B) the leader charges a higher price for its output compared to the follower. 
C) the follower produces a larger output compared to the leader. 
D) the follower charges a lower price for its output compared to the leader.

Exam 7: Between the Extremes: Interaction and Strategy

When is a game dominance solvable?

Why do competitive firms enter the market in spite of the price war threatened by the dominant firm?

In games without dominant strategies the Nash equilibrium can be found by using:

In a Betrand price-setting duopoly model, the equilibrium output:

Post deregulation, airlines attempted to maintain their earlier profit levels by instituting price discrimination in such forms as advance purchase ticket restrictions and frequent-flyer mileage programs.These methods generally did not succeed in maintaining those profit levels.

The following matrix represents the payoffs to two producers, each making a strategic choice either to keep the output at 5 units or at 10 units. -Refer to Table 7-1.Which of the following output combinations represents the dominant strategy of the two players?

In an oligopoly market with a dominant firm and a competitive fringe, if market demand is _, the market price will be low and the _ profit will be small.

How is the dominant firm's residual demand curve derived in an oligopoly market?

In an ascending value auction, a bidder attempts to win a certain object by bidding a price below his valuation but higher than anyone else's bid.

Explain the concept of Nash equilibrium with an example.

When can a grim trigger prevent oligopolists from breaking an agreement?

In the Stackelberg leadership model,