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ECON2302 - KC - Ch17

Economics Chapter 17 review

QuestionAnswer
Only 2 firms, Acme & Pinnacle sell a product. Each firm same constant marginal cost $10 and $0 fixed cost. They agree to jointly maximize profits, but each go over $100. How much do they lose? $1,000
The primary purpose of antitrust legislation is to protect the competitiveness of U.S. markets.
The Sherman Antitrust Act prohibits competing firms from even talking about fixing prices. True or false? TRUE
Definition of oligopoly: A market structure in which only a few sellers offer similar or identical products.
Definition of game theory: The study of how people behave in strategic situations.
Definition of collusion: An agreement among firms in a market about quantities to produce or prices to change.
Definition of cartel: A group of firms acting in unison.
Definition of Nash equilibrium: a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen.
The prisoners' dilemma game provides insight into why cooperation is difficult.
All examples of the prisoners' dilemma game are characterized by one and only one Nash equilibrium. True or false? FALSE.
Definition of dominant strategy: a strategy that is best for a player in a game regardless of the strategies chosen by the other players.
In a competitive market, strategic interactions among the firms are not important. True or false? TRUE
2 companies own adjacent oil fields. Underneath is a common pool of oil worth $30 million. For each will that is drilled, the company incurs a cost of $3 million. Each can drill up to 2 wells. What is the likely outcome if each pursue self-interest? Each company drills 2 wells and experiences a profit of $9 million.
Tying can be though of as a form of price discrimination. True or false? TRUE
Suppose the market for this product is served by 2 firms who have formed a cartel. What price will the cartel charge in this market if the marginal cost of production is $0? $8
Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores, Inc. and Wal-Mart. Which of the following will always be true? Wal-Mart and CSS Inc will always sell Apple Computers for exactly the same price.
Acme Computer Co. sells computers to retail stores for $400. If Acme requires the retailers to charge customers $500 for the computers, then it is engaging in resale price maintenance.
When prisoners' dilemma games are repeated over and over, sometimes the threat of penalty causes both parties to cooperate. True or false? TRUE
Definition of duopoly:
Created by: debra473
 

 



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