ECON 213 InQuizitive ch. 13 Liberty University Solution

Chapter 13: Oligopoly and Strategic Behavior

Apply the correct label to each network externality or externality-related effect.

What generally causes U.S. companies in oligopoly to have similar prices?

How is oligopoly different from monopolistic competition?

The Sherman Antitrust Act of 1890 was successful enough in reducing the power of cartels and monopolies that no further legislation to curb monopoly power has ever been needed.

What must be demonstrated to prove that a company engaged in predatory pricing?

Joey and Sarah own competing cell phone companies. Using tit-for-tat strategy, describe what Joey should do if Sarah decides to change her advertising practices. Fill in the blanks to complete the passage.

Two cable companies serve a city. The companies are of comparable size and are charging the profit-maximizing price. Then Company A raises its prices.

According to the kinked demand curve theory, what will Company B do?

How could network externalities encourage monopolistic behavior? Fill in the blanks to complete the passage.

Why might it be difficult for the firms in a duopoly to form a cartel? Fill in the blanks to complete the passage.

Why would two rival airlines choose not to follow a tit-for-tat strategy to reduce or eliminate advertising?

The output in chairs per month for four firms is:

200 for firm A

300 for firm B

275 for firm C

320 for firm D

The total output of the chair industry is 2,000 chairs per month. If firms A, B, C, and D are the four largest firms in the industry, calculate the four-firm concentration ratio for the chair industry by finding out what percentage of the total output the four firms are responsible for. Round your answer to the nearest whole percent.

Three separate oligopolists in the same industry serve a city. Company A is the dominant firm in the industry and produces a large share of the total output in the industry. Companies B and C are rival firms, but they are much smaller than Company A. Company A sets its price at a level that maximizes its own profits.

According to the theory of price leadership, what will Companies B and C likely do?

When are prices higher? Order the following market scenarios from lowest price to highest price based on their descriptions.

Why might network externalities cause a new cable provider to be unsuccessful when it tries to enter the market?

Lukas owns a phone company in a city with three other phone companies. He wants to attract more customers and is considering lowering his prices to do so. According to the kinked demand curve theory, will this strategy work? Fill in the blanks to complete the passage.

Sometimes duopolists try to cooperate with one another. Match the economic phenomenon to the description that most accurately describes it.

Maddie and Gavin own competing bakeries in a small town. Maddie lowers her bakery’s prices to a point at which Gavin cannot compete, and he must go out of business. Gavin believes Maddie deliberately lowered her bakery's prices with the intent of driving his bakery out of business. Gavin wants to file suit against Maddie. Does Gavin have a case? Fill in the blanks to complete the passage.

Match the strategy to the scenario it describes.

Match the company to the outcome of its antitrust suit.