HW #8 ECN 212 – Flashcards
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an agreement between two duopolist to function as a monopolist usually breaks down because?
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Each duopolist wants a larger share of the market to capture more profit
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After initial success, the OPEC cartel saw the price of oil and the revenues of its members decline due, in part, to?
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OPEC members failing to produce their agreed-upon production levels
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predatory pricing involves a firm?
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temporarily cutting the price of its product to drive a competitor out of the market
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an oligopoly is a market in which?
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There are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market
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A market structure with only a few sellers, each offering similar or identical products, is known as?
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oligopoly
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cartels are difficult to maintain because?
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there is alwAys tension between cooperation and self-interest in a cartel
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an agreement among firms in a market about quantities to produce or prices to charge is called?
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collusion
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an equilibrium occurs in a game when?
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all players follow a strategy that have no incentive to change
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when an oligopoly market reaches a Nash equilibrium,
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firms will have chosen its best strategy, given the strategies chosen by other firms in the market
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game theory is important for the understanding of?
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oligopolies
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the lower the concentration ratio, the
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more competitive the industry
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in an oligopoly, each firm knows that its profits?
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depend on both how much output it produces and how much output its rival firms produce
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in game theory, Nash equilibrium is?
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1. an outcome in which each player is doing his best given the strategies chosen by other players
2. an outcome in which no player wishes to change her chosen strategy given the strategies chosen by the other players
3. the outcome that occurs when all players have a dominant strategy.
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because oligopoly markets have only a few sellers, the actions of any one seller?
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1. can have a large impact on the profits of other sellers in the market
2. will affect how other firms behave in the market
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Like monopolists, oligopolists are aware that an increase in the quantity of output always?
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reduces the price of their product
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in the prisoners' dilemma game, self interest leads
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1. each prisoner to confess
2. to a breakdown of any agreement that the prisoners might have made before being questioned
3. to an outcome that is not particularly good for either prisoner
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in an oligopoly, the total output produced in the market is?
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higher than the total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive.
