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Exam 7: Cartels and Oligopoly

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Question 61

Multiple Choice

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If Big City Appliances is in tacit collusion with three smaller appliance firms and Big City Appliances consistently makes price changes that the other three firms then also make, this is an example of________ by Big City Appliances.

A) a precommitment
B) a meet- the- competition clause
C) a meet- or- release clause
D) price leadership

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

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Question 62

Multiple Choice

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It is more likely for tacit collusion to occur in the _________ market compared to the________ _ market.

A) fast food; commercial airline
B) commercial airline; fast food
C) dog food; commercial airline
D) dog food; cellular telephone provider

E) A) and D)
F) A) and B)

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Question 63

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In a situation of mutual interdependence and identical products, managers of oligopolistic firms ________a response to their rivals' actions and________ compete on price.

In a Stackelberg oligopoly, the follower second firm determines its production from its Cournot best- response function.

If Best Beds, Bedding R Us, and Sleepy Beds are all competing in the bedding market and Best Beds consistently is the first to change prices, Best Beds might be________.

Price visibility can work both for and against tacit collusion.

In order to sustain a cartel, members are required to sign binding contracts.

Cournot and Stackelberg oligopolies are similar in that they ________.

Hotels R Us and Hotel Supply are two hotel toiletry suppliers that are competing with each other. If Hotels R Us announces an upcoming price change next month, it may be signaling to Hotel Supply its intent to engage in _________ .

When firms have a tacit collusion agreement, if prices are highly visible, this decreases the cost of cheating.

If Luxury Spas, Renew Spas, and Relax Spas are all competing in the spa market and Relax Spas consistently is the first to change prices, Relax Spas might be _________.

As the number of firms in a Cournot oligopoly increases, the equilibrium quantity gets closer and closer to the monopoly quantity.

A small nation has three gasoline suppliers with a linear monthly market demand equal to: Q = 500,000 - 5P. Each firm's marginal cost (MC) and average total cost (ATC) curves are horizontal at $10,000 per month. -Refer to the information above. If the firms compete, what is the equilibrium quantity in the market?

In a Bertrand oligopoly, firms select ________and earn _________ economic profit.