b) price leadership; collusion *The game would temporarily move to either cell B or cell C. Chapter 14 Oligopoly and Strategic Behavior L, ECON 1001: Chapter 20 (Public Finance and Exp, Test Practice Questions (Exam 3), Chapter 10, ECON 1001: Chapter 23 (Income Inequality, Pov, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, Alexander Holmes, Barbara Illowsky, Susan Dean. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. *localized markets, *dominant firms d) their profits and sales will rise When two major players dominate a sector, the market becomes a duopolyDuopolyWhen there are two market leaders in any industry or service, this is referred to as a duopoly. Which of the five do you feel is the most important? B) the firms may legally form a cartel. The concentration ratio is a tool that measures the market share leading companies have in an industry. C) strategies E) none of the above is done. c) By changing pricing strategies c) Nash equilibrium They do it strategically so they do not lose their customers in what could be a price war. B) a contestable market. D) All of the above. *The firm's demand curve will shift further to the right. A) there are only two producers of a particular good competing in the same market A firm in an oligopolistic market ______. C) Trick cheats, while Gear complies with the agreement. D) in neither a repeated game nor a single-play game. 4. Oligopolyis a market structure B. b) There are barriers to entry into the market. C) perfectly elastic. A) a market where three dominant firms collude to decide the profit-maximizing price. *mutual interdependence The characteristics of oligopoly include interdependence, product differentiation, high barriers to entry, uncertainty, price setters. This represents what kind of problem with the four-firm concentration ratio? . *To obtain lower input prices Such companies have complete control of the market, earning high profits and gains in a specific sector or service. D) marginal revenue curve is discontinuous. A) "Gas prices in this town always go up and down together." 21) It is difficult to maintain a cartel for a long period of time. A) each firm can act like a monopoly. When the negotiations began, DTR had debt of$80 million and equity of $50 million. How are profitability and risk impacted by changes in the current liabilities to total assets ratio? As a result, the implementation of the policy has been marginalizing the rural settled peasant . If Marilyn believes that the $10 million stock issue was undertaken only to improve DTRs True or false: A cartel abides by a formally written agreement that specifies the output and price of each member firm and is a form of overt collusion. Each optometrist can choose to advertise his service or not. An oligopolistic market exhibits the followingoligopoly features: It raises barriers for new entrants to enter into the respective sector. b. In other words, when there are two or more than two, but not many, producers or sellers of a product, oligopoly is said to exist. ECO-FINALS_LESSON-1 - Read online for free. B) of barriers to entry. C) there are numerous producers of two goods competing in a competitive market Sometimes there may be many firms but the large share of the industrys productive capacity is accounted for only by a few firms, the others share will be insignificant as far as the market is concerned. Your email address will not be published. Thus, the land is worth b) Affect profits without influencing the profits of rival firms Therefore, the competing firms will be aware of a firm's market actions and will respond appropriately. Sweezy Oligopoly - based on a very specific assumption regarding how other firms will respond to price increases and price cuts. B) marginal cost curve is discontinuous. B) interdependence of firms. The payoffs in the table are the economic profit made by Bud and Miller. ), Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase? C) a firm in monopolistic competition. Click the card to flip Definition 1 / 84 the breakkkk, The fact that industry concentration may be overstated because the four-firm concentration ratio only accounts for production within the United States represents what kind of shortcoming with the four-firm concentration ratio? d) Cost leadership model The four-firm concentration ratio is based on the ___. Such companies have complete control of the market, earning high profits and gains in a specific sector or service. We unlock the potential of millions of people worldwide. a market structure characterized by a small number of interdependent sellers is called a oligopoly Which of the following is NOT a common characteristic of oligopoly? (Enter one word for each blank. b) its rivals match a price cut but ignore a price increase 0. Strategic independence. It determines the law of demand i.e. The policy implementation process has not taken in to account the life of rural peasants living in vicinity of cities. Which of the following is not a characteristic of oligopoly? What are the 4 characteristics of oligopoly? b) An outcome in the payoff matrix from which both firms want to deviate since the current strategy is not optimal for either firm. Which of the following statements correctly describes Dr. Smith's strategy given what Dr. Jones may do? they set up a 1 meter (100 cm) track. A) only Bob would like to change his decision. Meanwhile, all firms know that their decisions affect other firms sales and profit, hence they necessarily react against those decisions. as the price increases, demand decreases keeping all other things equal. However, the cartel system is fragile and considered illegal in many parts of the world as it includes increased technical and quality standards, mutually agreed pricing or price-fixingPrice-fixingPrice fixing is an agreement between business competitors to increase (very often), reduce (perhaps for a short time), establish, or stabilize (rarely) prices, disregarding the prices governed by the market's flow of demand and supply.read more, etc. d) Oligopolistic collusion, Compared to monopolies, oligopolies ______. It is assumed that all of the sellers sellidentical or homogenous products.read more, monopoly, and monopolistic competition. *manipulating consumer preferences. Price fixing is an agreement between business competitors to increase (very often), reduce (perhaps for a short time), establish, or stabilize (rarely) prices, disregarding the prices governed by the market's flow of demand and supply. The firms comprise an oligopolistic market, making it possible for already-existing smaller businesses to operate in a market dominated by a few. c) price leadership c) The percentage of total industry sales accounted for by the four largest firms Experts are tested by Chegg as specialists in their subject area. E) None of the above. Without collusion, if a firm incorrectly assumes that its rivals will charge the same price but its rivals actually charge a lower price, the firm's demand curve will shift to the ____. a) Demand is highly elastic below the going price C) if Jane does not change her decision, Bob would like to change his. Characteristics: There are few firms in the market serving many consumers. D) increase the amount they produce. As a result, each firm obligates to adhere to pre-determined price and quantity/output levels to maximize revenue. b) demand theory The equilibrium ________ a dominant strategy equilibrium because the strategy in this game is for a firm ________. E) none of the above. A small number of sellers. What are three models used to study pricing and output by oligopolies? b) Mutual interdependence Any decision taken by a firm in order to increase its sales would adversely affect the sales and hence profit of the other firms. c) They move leftward and upward to a higher point on the average-total-cost curve. a) The number of average-sized firms in an industry needed to produce sales equivalent to the four largest firms Interdependence b) Demand is highly elastic below the going price An oligopolistic firm's marginal revenue curve is made up of two segments if ______. A) costs, prices, profit, and strategies. e) may be no more efficient due to a lack of firm interdependence, c) may be less desirable because they are not regulated by government to protect consumers. As a result, monopolists produce less, at a higher average cost, and charge a higher price than would a combination of firms in a perfectly competitive industry. A market is considered to be a(n) ______ when the largest four firms in an industry control more than 40% or more of the market. *The game would eventually end in the Nash equilibrium (cell B or C). Business Economics Consider a Cournot oligopoly with n = 2 firms. The urban land lease policy is not very friendly to rural households land in general and the poor land holders in particular. 5) According to the kinked demand curve theory of oligopoly, each firm believes that if it raises its price, A) "I am producing extra widgets, even though it costs me short-run profits, to stop Wally's Widgets from expanding into my market." Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat. It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions. Impure because have both lack of Oligopoly as a market structure is distinctly different from other market forms. In the scenario above, the market is. Four characteristics of an . b) flexible We reviewed their content and use your feedback to keep the quality high. Over a long time period, cheating ______ collusive oligopolies C) the firms keep profits and prices so low that no rivals are . C) Miller has a dominant strategy but Bud does not. a) The possibility of price wars diminishes and profits are maximized. A Computer Science portal for geeks. Firms in anoligopoly marketfocus on non-price competition and less innovation but ensure their brands are uniquely identifiable. oligopoly, monopoly, monopolistic competition, pure competition pure competition, monopolistic competition, oligopoly, monopoly. $6. A) a Competition Tribunal. a) The possibility of price wars diminishes and profits are maximized. e) Price leadership model, a) Kinked-demand curve model Question: Which of the following is NOT a characteristic of an oligopoly? d) through advertising, Firms have a desire to cheat on a collusive agreement because ______. After each player chooses his or her best strategy and sees the result, Also, as there are few sellers in the market, every seller influences the behavior of the other firms and other firms influence it. d) greater than or equal to 60%, How can oligopolistic firms influence their profits and the profits of their rivals? c) less than or equal to 40% If the products of the firms are homogeneous then the interdependence will tend to be strong because of the perfect substitutability of the products of the firms. O B. b) are few in number C. The choices made by one firm have a significant effect on other firms. *It lowers search costs of information for consumers. c) have no rivals It encompasses several industries, including banking and investment, consumer finance, mortgage, money markets, real estate, insurance, retail, etc. at least $10 million. While adopting the leaders price, if firm B supplies less amount than XB which needs to maintain the equilibrium price, the leader will push to a non-profit maximizing position. *dominant firms A) behave competitively. Oligopolists in an oligopolisticmarket structure agree not to raise their prices but match only price cuts to avoid price rigidity. d) monopolistically competitive market, The study of how one firm reacts to the actions taken by another firm or individual when implementing a strategy is called _____. In this market, there are a few firms which sell homogeneous or differentiated products. C) specify how marginal cost is determined. c) dominant firms C) potential entrants entering and making zero economic profit. Which of the following is not a characteristic of an oligopoly? a) purely competitive market If this occurs, then the firm's demand curve will look ______. What are the positive effects of large oligopolists advertising? d) percentage of industries that are oligopolies, c) sales of the largest firms in an industry, Firms in oligopolistic industries are "price makers" because such firms ______. (Pure) Monopoly 3. Mutual interdependence among the firms in decision making is the essential feature of the oligopolistic market. In a monopoly, only one big brand influences the entire market without any competition. A non-collusive oligopoly refers to a market situation where the firms compete with each other rather than cooperating. a) its rivals collude *To obtain lower input prices It helps avoid the potential price war and price rigidity. E) downward-sloping demand curve with no kink. It is used as one of the strategies to increase the business firm's revenue and increase the market share.read more. D) There is more than one firm in the industry. . c) may be less desirable because they are not regulated by government to protect consumers B) revenues, elasticity, profit, and payoffs. Which of the following is characteristic of oligopoly, but not of monopolistic competition? A) is; to comply regardless of the other firm's choice a) necessary *Patents, Which are reasons that that firms merge? B) Dr. Smith does not advertise no matter what Dr. Jones does. E) more elastic than the demand just above the price at the kink. 0. is the demand curve for taxi rides in a town, and, 14) Refer to Figure 14.1.1. The market share of the firms is unequal. The total market demand is P(Q) = 50 - 2Q, where Q is the total quantity produced by all (active) firms in the industry. *The firm's profits will be higher. 1. d) Its marginal revenue curve would consist of two segments, d) Its marginal revenue curve would consist of two segments a) localized markets b) greater than or equal to 50% They do so through collusion that results in higher prices and fewer production or product choices for customers. Small Number of Number: The number of firms in an oligopoly market is small where each firm controls an important proportion of the total supply. The core competencies in business refer to its resources and unique fundamental capabilities that distinguish it from market competitors. What is it called when firms reach a verbal or tacit agreement with rivals about price in a social setting like the golf course? ENGL1190_V0854_2023WI_Communications23.docx. It can be also called as one form. d) achieve greater allocative efficiency but lesser productive efficiency, c) give the appearance of increased competition When members of an oligopoly react to price changes by a ____ _____ dominant firm, the model is most applicable. 10) In the dominant firm model of oligopoly, the dominant firm produces the quantity at which marginal revenue equals In third-degree price discrimination happens when customers are segregated by . They may produce homogeneous products or differentiated products. D) is not; to comply when the other firm complies and to cheat when the other firm cheats D) the four-firm concentration ratio for the industry is small. It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions. The presidents friend constructs and sells single family homes. d. 2. . In the credit card industry, for example, Visa and MasterCard have a duopoly. C) lower the price of their products. a) major firms in an industry ranked by employment The factors that determine a market structure include the number of businesses, control over prices, and barriers to market entry. 0) If the efficient scale of production only allows three firms to supply a market, the market is a. 2. 11) Which one of the following quotations best describes a dominant firm oligopoly? E) both are price takers. Collusion becomes more difficult as the number of firms ____. *To increase economies of scale, *To increase market share Artificial intelligence (AI) services are on the rise, with every industry readying to integrate the technology sooner or later.