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13 OLIGOPOLY. © 2012 Pearson Addison-Wesley Q1: In ________, a firm’s output depends ________. A oligopoly; only on its own marginal revenue and marginal.

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Presentation on theme: "13 OLIGOPOLY. © 2012 Pearson Addison-Wesley Q1: In ________, a firm’s output depends ________. A oligopoly; only on its own marginal revenue and marginal."— Presentation transcript:

1 13 OLIGOPOLY

2 © 2012 Pearson Addison-Wesley Q1: In ________, a firm’s output depends ________. A oligopoly; only on its own marginal revenue and marginal cost B monopolistic competition; in part on its competitors’ price and quantity decisions C oligopoly; in part on its competitors’ price and quantity decisions D monopolistic competition; only on its own marginal revenue

3 © 2012 Pearson Addison-Wesley Q2: Two firms make most of the consumer alkaline batteries in the country: Duracell and Energizer. The market for batteries is most likely _______. A a monopoly B an oligopoly C perfectly competitive D monopolistically competitive

4 © 2012 Pearson Addison-Wesley Q3: In a duopoly game, we observe the following payouts: If the two firms collude, they will each make $50,000. If one firm cheats, then it makes $60,000 and the other firm makes $10,000. If both firms cheat, then they each make zero economic profit. In this game, what is the Nash equilibrium? A Both firms cheat. B Only one firm will cheat. C Neither firm will cheat. D It is impossible to say.

5 © 2012 Pearson Addison-Wesley Q4: Intel has 80 percent of the market for microprocessors, AMD has the rest. Conducting R&D is very expensive, so suppose that each firm can either undertake R&D or not. If both firms undertake R&D, each firm will make a profit of $50 million. If one firm does not undertake R&D, that firm makes a loss of $10 million while the other firm makes a profit of $100 million. If both neither firm undertakes R&D, each firm breaks even. What is the outcome of this game? A Both firms will conduct R&D. B Both firms will steal R&D. C The outcome will be a dominant strategy equilibrium. D Only one firm will conduct R&D, but we cannot predict which firm will conduct R&D.

6 © 2012 Pearson Addison-Wesley Q5: The main purpose of antitrust law is to _______. A prohibit firms from becoming a monopoly or behaving like a monopoly B regulate advertising C encourage the formation of cartels D regulate the price that firms in oligopoly charge


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