Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Textbook Question
Chapter 10, Problem 20SQ
The “kinked” oligopoly
- a.
price increases will be matched, but price reductions will not. - b. price increases will not be matched, but price reductions will.
- c. both price increases and price reductions will be matched.
- d. neither price increases nor price reductions will be matched.
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Explain the general meaning of the profit payoff matrix below for oligopolists X and Y. All profit figures are in thousands.
a. Use the payoff matrix to explain the mutual interdependence that characterizes oligopolistic industries.
b. Assuming no collusion between X and Y, what is the likely pricing outcome? c. In view of your answer to 3b, explain why price collusion is mutually profitable. Why might there be a temptation to cheat on the collusive agreement?
According to the kinked demand curve theory of oligopoly each firm thinks its demand curve at prices above the existing price is
a. less elastic than at prices below the exisiting price since price increases will be matched.
b. more elastic than at prices below the exisiting price since price increases will be matched.
c. less elastic than at prices below the exisiting price since price increases will not be matched.
d. more elastic than at prices below the exisiting price since price increases will not be matched.
Why do firms in an oligopoly have an incentive to cheat on collusion
agreements?
A. Cheating prevents other firms from lowering prices.
B. Cheating produces a kinked demand curve for the industry.
C. Cheating results in greater profits for the individual firm.
D. Cheating increases the industry's total profits.
Chapter 10 Solutions
Micro Economics For Today
Ch. 10.1 - Prob. 1YTECh. 10.5 - Prob. 1GECh. 10.6 - Prob. 1YTECh. 10 - Prob. 1SQPCh. 10 - Prob. 2SQPCh. 10 - Prob. 3SQPCh. 10 - Prob. 4SQPCh. 10 - Prob. 5SQPCh. 10 - Prob. 6SQPCh. 10 - Prob. 7SQP
Ch. 10 - Prob. 8SQPCh. 10 - Prob. 9SQPCh. 10 - Prob. 10SQPCh. 10 - Prob. 11SQPCh. 10 - Prob. 12SQPCh. 10 - Prob. 13SQPCh. 10 - Prob. 1SQCh. 10 - Prob. 2SQCh. 10 - Prob. 3SQCh. 10 - Prob. 4SQCh. 10 - Prob. 5SQCh. 10 - Prob. 6SQCh. 10 - Prob. 7SQCh. 10 - Prob. 8SQCh. 10 - Prob. 9SQCh. 10 - An oligopoly is a market structure in which a. one...Ch. 10 - Prob. 11SQCh. 10 - A common characteristic of oligopolies is a....Ch. 10 - Prob. 13SQCh. 10 - Prob. 14SQCh. 10 - Prob. 15SQCh. 10 - Prob. 16SQCh. 10 - Prob. 17SQCh. 10 - Prob. 18SQCh. 10 - Prob. 19SQCh. 10 - The kinked oligopoly demand curve is a result of...
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- An oligopoly takes into account the decisions made by other companies before lowering its price.. true or falsearrow_forwardWhat strategy can work like a silent form of cooperation within the framework of an Oligopoly ? A. Always match the price cuts of other, competing, firms; but do not match price increases. B. Always match the price increases of other, competing firms; but do not match price cuts. C. Immediately match any and all price changes. D. Secretly preparing for corporate mergers.arrow_forwardWhat are the characteristics of an oligopoly? Choose all that apply. A. One particular product or service has no substitute. B. A few large sellers exist. C. Only one seller exists. D. Products and services tend to be identical or similar.arrow_forward
- In an oligopoly, each firm’s share of the total market is typically determined by which of the following ? Explain a. scarcity and competition. b. kinked-demand curves and payoff matrices. c. homogeneous products and import competition. d. product development and advertisingarrow_forwardFor each statement in the left column find and match convenient part from the right column of the table: Write your answer A. The market, represented by a group of sellers, unified by an agreement on its segmentation and final price of the production, is considered as ... 1. ... for the oligopoly B. The situation in which society undergoes losses due to high prices and low output is more typical for ... 2 ... for the price discrimination C. The market in which several sellers can affect and control the price of products in an industry is typical for ... 3. ... for the price competition D. The situation when a different price is given for the same product is typical for ... 4. ... for the market of imperfect competition E. Limited resources is the main factor determining the situation typical for ... 5. ... for the perfect competition F. The absence of the supply curve is typical for... 6. ... for the cartel…arrow_forwardWhich of the descriptions are characteristics of oligopoly and which are not? a. significant barriers to entry b. large number of firms producing differentiated products c. free entry and exit d. large number of buyers and sellers e. firms must consider competitors' reactions when making decisionsarrow_forward
- Which of the following is the primary reason an oligopoly is not a pure price maker? A. Dominant pricing strategy B. Product differentiation C. Dependent on pricing decisions of competitorsarrow_forwardWhich of the following statements about oligopoly are FALSE: A. Oligopolies have a tendency to collude and form cartels in order to split monopoly like profits B. Oligopolistic markets under collusion are socially inefficient (create deadweight loss) C. If two firms are in a collusion and Firm 1 violates the agreement by lowering the price, Firm 1 will increase its own profit but overall profit in the industry will go down D. All of the above statements are truearrow_forwardOligopoly Game Theory X's possible prices $40 $35 $57 $59 $60 $55 $50 $55 $69 $58 a. Use the payoff matrix to explain the mutual interdependence that characterizes oligopolistic industries. b. Assuming no collusion between X and Y, what is the likely pricing outcome? c. In view of your answer to b, explain why price collusion is mutually profitable. Why might there be a temptation to cheat on the collusive agreement? Answer: Y's possible prices $35arrow_forward
- which of the following statements about industries that are oligopolies is false? Select one a. An oligopoly with two firms is calleda duopaly, b. Firms in these industries may attempt to cooperate. C The fact that there is more than one firm in an oligopoly means that there are no barrien to entry d. Firms in these industries are interdependentarrow_forwardFirm x is and oligopoly market. Market demand is inelastic, so this firm can increase profit by rasing prices. However, if it does so, it might lose sales to its competitors. How can this frim use price signaling to increase its profits?arrow_forwardWhich of the following would most likely create the setting for an Oligopoly ? A. The government grants T'Challa and Nakia a patent for their respective vibranium-based electric car batteries. B. Market Demand is two or more times less than the quantity needed to produce at the minimum of the Average Cost Curve. C. Market Demand is two or more times greater than the quantity needed to produce at the minimum of the Marginal Cost Curve. D. Insumountable technological difficulty associated with producing similar products serves as an effective Barrier to Entry. E. All of the Abovearrow_forward
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