A) The automobile market where the market price is set by the price leader
B) The electricity market where there are significant barriers to entry
C) The cigarette market where there are a small number of large firms
D) The breakfast cereal market where the product is highly differentiated
E) A competitive auction where the good that is auctioned goes to the lowest bidder
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A) The second firm will earn twice as much revenue as the first firm.
B) The second firm will sell at a lower price than the first firm.
C) An increase in one firm's output will not affect the other firm's revenue.
D) The first firm will earn a higher profit than the second firm.
E) The market price will be determined by the second firm's output which is larger than the first firm's output.
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CR4 = 40 + 20 + 18 + ...View Answer
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A) sequential pricing
B) price leadership
C) price discrimination
D) tacit collusion
E) price fixing
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A) the firm acts as a price leader in the industry.
B) demand is elastic for price increases by the firm.
C) the firm expects other firms to match all price changes.
D) there is free entry and exit in the market.
E) the firm produces a differentiated product.
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An oligopoly is a market dominated by a ...View Answer
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After the newspapers merge,their common ...View Answer
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Firms seeking to tie-in goods will clearly see the profit potential for the tie-in.It makes demand for the tied product less elastic,permitting a higher price and profit.Price discrimination becomes more likely with tying.In addition,a firm may argue that one product works better when used with another produced by the same firm.An example might be applications software tied-in with a particular operating system software,such as Windows.The firm may be able to offer a group of products at a savings,compared to offering each separately.There may be legitimate quality control issues for requiring a tie-in.
Antitrust regulation is concerned with tying because it may lead to less competition in the tied-in product and serve as an entry barrier.Bundling that serves a legitimate business purpose is generally permitted.Tie-ins that are seen as creating an entry barrier are less likely to pass antitrust scrutiny.
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A) the number of firms that can profitably exist
B) the market share of each firm
C) the outcome of price discrimination
D) price rigidity among firms
E) collusive price agreements between firms
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A) The firm that sets the lowest price gains the entire market share.
B) A single firm sets a price which is lower than the current market price and gains market share at the expense of the other firms.
C) A single firm sets the price in the market,which is taken as given by the other smaller firms.
D) Each firm in the market sets its price based on the reaction of the other firm.
E) The firms in the market collude and set prices in order to maximize their combined profits.
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Concentration ratios for domestic sales and domestic production will differ if imports represent a significant portion of the former.For example,the "Big Three" U.S.automobile companies comprise more than 80% of domestic production,but only about 60 to 65% of domestic sales (since imports account for the other 15 to 20%).Industries with a large degree of import penetration include electronics,textiles,wines,and so on.
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A) also set a high price
B) earn a profit of $35,000
C) follow the low-price strategy
D) earn a profit of $30,000
E) earn a lower profit than firm A
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A) percentage of sales accounted for by the four firms.
B) total market capitalization of the four firms.
C) percentage of profits accounted for by the four firms.
D) total quantity of output of the four firms.
E) total costs of production of the four firms.
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The price leadership model of oligopoly ...View Answer
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A) A strategic situation in which some individuals enjoy the benefits of a good without incurring any of the costs associated with the good.
B) A strategic situation where there is a collective benefit from cooperation but the self-interest of individuals leads to an inferior outcome.
C) A strategic situation in which players make decisions in a sequential manner based on some information on the previous player's moves.
D) A strategic situation where a group of firms collude to set higher prices and maximize profits.
E) A strategic situation in which all players make their moves simultaneously,with no information about the other players' actions and in the process maximize individual returns.
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The kink in the demand curve occurs at 1...View Answer
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A) Product differentiation increases information asymmetry in a market.
B) Product differentiation reduces price differentials among competing goods by informing consumers about the features of a product.
C) Product differentiation can be based on perceived differences among products.
D) Product differentiation is the process of determining the optimal production of various products by a multi-product firm.
E) Firms in a perfectly competitive market practice product differentiation to attract consumers.
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The firms' quantities are strategic subs...View Answer
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A) The products sold by the firm are imperfect substitutes.
B) The equilibrium price in a Cournot duopoly is higher than the price in a monopoly.
C) The demand curve facing each firm is horizontal.
D) The market price is determined by the output produced by the firm with the larger market share.
E) The duopoly equilibrium lies between the pure-monopoly and purely competitive outcomes.
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The kinked demand curve model presumes that the firm determines its price behavior based on a prediction about its rivals' reactions to potential price changes.The firm assumes that rivals will match a price cut but ignore a price increase.The result is that demand is much more elastic above the current price (because sales volume will drop off quickly if rivals do not match a price increase),and fairly inelastic below the current price (rivals will cut price to prevent the firm from increasing market share).
The main conclusion of the model is that oligopoly firms will tend to stick to their current prices unless there is a dramatic shift in demand and/or cost.The model is not complete because it does not explain why the kink occurs at a particular price,nor does it justify the price-cutting behavior of rivals.
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