CH15 - Name Date 1 A situation in which a player has an incentive to cheat regardless of what the other player does and in which if both players

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Name: __________________________ Date: _____________ 1. A situation in which a player has an incentive to cheat regardless of what the other player does, and in which, if both players act in this manner, both players will be worse off, is referred to as: A) prisoners' dilemma. B) tit-for-tat strategy. C) price leadership model. D) kinked demand curve model. 2. The HHI for ________ where ________ have (has) ________ of the market is ________ . A) monopolistic competition; four firms each; 25%; 10,000 B) oligopoly; three firms each; 50%; 5,000 C) oligopoly; two firms each; 50%; 5,000 D) monopoly; one firm; 100%; 100,000 Use the following to answer question 3: Figure: Collusion Page 1
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3. (Figure: Collusion) In the figure, panel (c) gives the combined marginal revenue, demand, and marginal cost curves for an industry containing several firms. Panels (a) and (b) give marginal cost curves for two of those firms. The price charged by the industry under collusion is shown by: A) W. B) X. C) Y. D) Z. Use the following to answer question 4: Scenario: Payoff Matrix for Firms X and Y Use the following payoff matrix which depicts the profits for Firms X and Y who are trying to decide whether to choose a high or low price in their competitive strategy with each other. They are the only two firms in this oligopolistic industry. 4. (Scenario: Payoff Matrix for Firms X and Y) If firms such as Firm X and Firm Y wish to maximize joint profits, they should: A) each choose their dominant strategy. B) have one choose a dominant strategy and the other choose a nondominant strategy. C) consider their specific situations before choosing a strategy since strategies also entail costs. D) each choose a nondominant strategy. 5. Assume an oligopolist faces a kinked demand curve due to tacit collusion. In this case, a decrease in marginal cost within the range of the marginal revenue that corresponds to the tacit collusion output will cause the firm to: A) increase its output. B) decrease its price. Page 2
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increase its price. D) maintain the same price and output. 6. A well-known example of an international cartel is: A) Japan. B) OPEC. C) Exxon. D) General Motors. 7. In general, oligopolists find it easier to engage in collusive behavior when the industry is characterized by ________ behavior. A) Cournot B) Bertrand C) noncooperative D) interdependent 8. An industry that consists of two firms is: A) a duopoly.5 B) a monopoly. C) a monopsony. D) monopolistic competition. 9. The cable TV market has only two firms, CableNorth and CableSouth. Through tacit collusion, they each arrive at an equilibrium price and quantity and see their demand curve as kinked. Any decrease in marginal cost: A) will encourage both firms to produce more.
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This note was uploaded on 02/18/2012 for the course ECON 102 taught by Professor Kim during the Fall '08 term at University of Illinois, Urbana Champaign.

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CH15 - Name Date 1 A situation in which a player has an incentive to cheat regardless of what the other player does and in which if both players

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