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Answer the question based on the payoff matrices for a repeated game involving two firms that are considering introducing new products to the market. The numbers indicate the profit from following either a strategy to introduce a new product or a strategy to not introduce a new product.First game. Answer the question based on the payoff matrices for a repeated game involving two firms that are considering introducing new products to the market. The numbers indicate the profit from following either a strategy to introduce a new product or a strategy to not introduce a new product.First game. Second game. In the first game, A) introducing a new product is the dominant strategy for both firms. B) not introducing a new product is the dominant strategy for both firms. C) introducing a new product is the dominant strategy for firm A, while not introducing a new product is the dominant strategy for firm B. D) not introducing a new product is the dominant strategy for firm A, while introducing a new product is the dominant strategy for firm B. Second game. Answer the question based on the payoff matrices for a repeated game involving two firms that are considering introducing new products to the market. The numbers indicate the profit from following either a strategy to introduce a new product or a strategy to not introduce a new product.First game. Second game. In the first game, A) introducing a new product is the dominant strategy for both firms. B) not introducing a new product is the dominant strategy for both firms. C) introducing a new product is the dominant strategy for firm A, while not introducing a new product is the dominant strategy for firm B. D) not introducing a new product is the dominant strategy for firm A, while introducing a new product is the dominant strategy for firm B. In the first game,


A) introducing a new product is the dominant strategy for both firms.
B) not introducing a new product is the dominant strategy for both firms.
C) introducing a new product is the dominant strategy for firm A, while not introducing a new product is the dominant strategy for firm B.
D) not introducing a new product is the dominant strategy for firm A, while introducing a new product is the dominant strategy for firm B.

E) A) and B)
F) B) and C)

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Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit from either opening a coffee shop in a small town or not opening the coffee shop. If both firms choose their strategies simultaneously, then A) firm A's dominant strategy is to open a coffee shop. B) there is no Nash equilibrium for this game. C) firm B's dominant strategy is to not open a coffee shop. D) both firms have a dominant strategy to not open a coffee shop. Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit from either opening a coffee shop in a small town or not opening the coffee shop. If both firms choose their strategies simultaneously, then


A) firm A's dominant strategy is to open a coffee shop.
B) there is no Nash equilibrium for this game.
C) firm B's dominant strategy is to not open a coffee shop.
D) both firms have a dominant strategy to not open a coffee shop.

E) A) and D)
F) All of the above

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Mutual interdependence refers to the situation when entry by new firms into an industry will tend to shrink the profits of existing firms.

A) True
B) False

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Which of the following is the best example of oligopoly?


A) women's dress manufacturing
B) automobile manufacturing
C) restaurants
D) cotton farming

E) None of the above
F) B) and C)

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What would you expect the concentration ratio and Herfindahl index of the Internet search industry to look like?

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There are a few major firms in the marke...

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The Herfindahl index for an industry is 3,000. Which of the following sets of market shares and industry with four firms would produce such an index?


A) lose $150 million in profit and firm A will gain $25 million in profit.
B) gain $75 million in profit and firm A will lose $50 million in profit.
C) gain $25 million in profit and firm A will gain $150 million in profit.
D) gain $25 million in profit and firm A will lose $50 million in profit.

E) A) and B)
F) None of the above

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The U.S. steel industry is an example of homogeneous oligopoly.

A) True
B) False

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Refer to the diagram. Equilibrium price is A) e. B) d. C) c. D) b. Refer to the diagram. Equilibrium price is


A) e.
B) d.
C) c.
D) b.

E) C) and D)
F) All of the above

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The industry characterized by these data is A) an oligopoly. B) a monopolistically competitive industry. C) a purely competitive industry. D) a pure monopoly. The industry characterized by these data is


A) an oligopoly.
B) a monopolistically competitive industry.
C) a purely competitive industry.
D) a pure monopoly.

E) All of the above
F) A) and B)

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Game theory is best suited to analyze the pricing behavior of


A) pure monopolists.
B) pure competitors.
C) monopolistic competitors.
D) oligopolists.

E) All of the above
F) B) and C)

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Advertising can impede economic efficiency when it


A) increases entry barriers.
B) reduces brand loyalty.
C) enables firms to achieve substantial economies of scale.
D) increases consumer awareness of substitute products.

E) B) and C)
F) None of the above

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Which of the following factors tends to foster the development of an oligopoly?


A) economies of scale
B) foreign competition
C) antitrust legislation
D) low barriers to entry

E) A) and B)
F) None of the above

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Describe a positive sum game.

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In game theory, a positive sum game is o...

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Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. Without collusion, Nash equilibrium is represented by which cell? A) A B) B and C both C) D D) There is no Nash equilibrium in this game. Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. Without collusion, Nash equilibrium is represented by which cell?


A) A
B) B and C both
C) D
D) There is no Nash equilibrium in this game.

E) C) and D)
F) All of the above

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The terminal nodes in an extensive form representation


A) are used solely to show payoffs that represent a Nash equilibrium.
B) represent the starting points for a sequential game.
C) indicate the strategies available to the players of a game.
D) indicate the possible outcomes of a game.

E) B) and D)
F) B) and C)

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Refer to the profits-payoff table for a duopoly. If initially firm X's price was $6 and Y's price was $5, A) X would find it profitable to cut its price, provided Y also cut its price. B) Y would find it profitable to cut its price, provided X also cut its price. C) Y would find it profitable to raise its price by $1, provided X would also raise its price by $1. D) both firms would profit by simultaneously lowering their prices by $1. Refer to the profits-payoff table for a duopoly. If initially firm X's price was $6 and Y's price was $5,


A) X would find it profitable to cut its price, provided Y also cut its price.
B) Y would find it profitable to cut its price, provided X also cut its price.
C) Y would find it profitable to raise its price by $1, provided X would also raise its price by $1.
D) both firms would profit by simultaneously lowering their prices by $1.

E) B) and D)
F) B) and C)

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In the long run, an oligopoly


A) will produce less than a monopoly.
B) may be able to earn positive economic profits.
C) will always produce in the range of decreasing returns to scale.
D) will produce on the portion of the demand curve where demand is price-inelastic.

E) All of the above
F) None of the above

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If three or four homogeneous oligopolists collude, the resulting price and production outcomes will be similar to those of pure monopoly.

A) True
B) False

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A low concentration ratio means that


A) there is a low probability of entering the industry.
B) there is a low probability of success in the industry.
C) each firm accounts for a small market share of the industry.
D) each firm accounts for a large market share of the industry.

E) A) and C)
F) B) and C)

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Zippy's and Tony's are rival pizza restaurants in a small town. (Together they form a local duopoly.) Zippy's management determines that if it increases its advertising expenditures, it will increase profits regardless of whether Tony's increases its advertising budget. Based on this information, we can conclude that


A) this is a one-time game.
B) Zippy's has a dominant strategy in this advertising game.
C) this advertising game will reach a Nash equilibrium.
D) Zippy's has first-mover advantages in this advertising game.

E) B) and C)
F) None of the above

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