1. Assume the firms operating in an oligopolistic market experience a relatively
ID: 2440565 • Letter: 1
Question
1.
Assume the firms operating in an oligopolistic market experience a relatively small change in marginal costs. According to the kinked demand curve model this would:
A) cause a large change in the profit-maximizing level of output.
B) leave the equilibrium price unchanged.
C) cause the profit-maximizing level of output to change by the same amount and in the same direction.
D) cause the profit-maximizing price to change by the same amount but in the opposite direction.
2.
In game theory, a Nash equilibrium is defined as:
A) the dominant strategy of each player.
B) a set of strategies for which all players are choosing their best strategy, given the actions of the other players.
C) the set of strategies that result in the maximum payoff to each player.
D) the set of strategies chosen when the players in a game can cooperate with each other.
3.
Predatory pricing is used primarily to:
A) discourage new firms from entering a market.
B) reduce (limit) the profits of all of the firms in the industry.
C) drive other firms out of a market.
D) establish a minimum price all of the firms in the market will charge.
Explanation / Answer
1.
An Oligopoly firm facing a kinked demand curve when experiences a change in marginal cost would change cost without changing the profit-maximizing output or price from its initial level.
the correct option is (b)
2.
In a game theory, the Nash equilibrium is defined as a set of strategies for which all players are choosing their best strategy given the actions of the other players.
the correct option is (b)
3.
Predatory pricing is used primarily to drive other firms out of a market especially used in the monopolistic market where there are fewer barriers to entry.
the correct option is (c)
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