1. The interdependence of profits in oligopoly markets is caused by a. the exist
ID: 1224014 • Letter: 1
Question
1. The interdependence of profits in oligopoly markets is caused by
a. the existence of only a few relatively large firms in the market.
b. rival firms producing homogeneous products.
c. managers keenly engaged in competitor-oriented behavior (i.e., the desire to beat rivals out of market share).
d. both b and c
2.In sequential decision making situations, which if any of the following statements is NOT true about using the roll-back method to solve a strategic decision problem?
a. Roll-back methodology requires that predictions about what the second-mover will do to be employed by the decision maker going first.
b. Roll-back analysis always finds a Nash equilibrium.
c. Using the roll-back methodology, the firm going second can safely ignore what its rival chooses to do –i.e., the first-mover’s decision is irrelevant for determining how the second-mover will act.
d. All of the above statements are true statements
3.In a duopoly market where the two firms are competing in setting their prices, price “HIGH” is a dominant strategy if HIGH
a.would never be the best strategy for either of the two firms.
b.always leads to the best outcome no matter which strategy a firm’s rival might choose.
c.always provides the best possible outcome for both firms.
d. is strategically stable for BOTH firms.
Explanation / Answer
Ans 1 (D) The firms decisions are always depend on what other rival firms ddo. They are dependent on what other firms would do. So if one firm decreases its prices then ther firms also decreases its price, in order to capture the market share.
Ans 2. (B)
Ans 3. (A), if one firm rises their price, other firm would not increase the price and would capture the market share.
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