Homework Answers
7. Option 4. Illustrates why oligopolists may be reluctant to change their pricing strategy.
Explanation: An oligopolist firm generally gets involved in the non-price competition as competing on the basis of price can reduce the profitability of the entire industry. Therefore, they are reluctant to change their pricing strategy.
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Question7 0.1 pts A kinked demand curve O is used to show why oligopolists frequently change...
The kinked-demand curve for oligopolists assumes that rivals will
a. The kinked-demand curve for oligopolists assumes that rivals will match price cuts and price increases. match price increases, but ignore price cuts. match price cuts, but ignore price increases. neither match price cuts nor price increases. b. There is a gap in the oligopolist's marginal-revenue curve because price drops abruptly. the cost of production changes abruptly. the slope of the demand curve changes abruptly. price rises abruptly. c. The kinked-demand curve explains price rigidity in oligopoly because firms expect any change in price will lower revenue and profits. firms agree to...
4. A kinked demand curve can explain rigidity of oligopolists' administered price. What does inflexible, administered...
4. A kinked demand curve can explain rigidity of oligopolists' administered price. What does inflexible, administered pricing mean? a. b. Why would an oligopolist have little motivation to change its price frequently? In the diagram below, assume that the equilibrium price is at point G. Is this over costs? Is the oligopolist earning economic profit? Explain C. d. At G there is a kink in the effective demand and marginal revenue curves of the oligopolist. Why? i. If it cuts...
The kinked demand curve explains the observation that in oligopoly markets Multiple Choice Rivals match price...
The kinked demand curve explains the observation that in oligopoly markets Multiple Choice Rivals match price increases. 0 Prices may not change even in the face of cost increases. 0 Practice product differentiation 0 C) Rivals do not match price reductions 0 O Some companies co not play by the rules
Question 18 1.5 pts An oligopolist operating with a kinked demand curve would expect rivals to...
Question 18 1.5 pts An oligopolist operating with a kinked demand curve would expect rivals to match both its price increases and price decreases. True False
Why are oligopoly firms often reluctant to change the price of their product? O They fear...
Why are oligopoly firms often reluctant to change the price of their product? O They fear that their competitors will follow price decreases but ignore price increases They fear that their competitors will ignore price decreases but follow price increases They know that their competitors will always match their price changes They fear losing sales, because demand is always inelastic in oligopoly markets
34. Game Theory suggests that oligopolists selling differentiated products have an incentive to decrease their advertising,...
34. Game Theory suggests that oligopolists selling differentiated products have an incentive to decrease their advertising, but only if their rivals also agree to scale back their advertising have and incentive to decrease their advertising if the rival firms increase their advertising have an incentive to increase their advertising no matter what rival firms do about advertising should always maximize their advertising program in order to assure that they gain customers Flag this Question Question 352.5 pts 35. All of...
Chapter 14 Vocabulary Name: a. Kinked demand curve b. Cartel c. Price leadership d. Game theory...
Chapter 14 Vocabulary Name: a. Kinked demand curve b. Cartel c. Price leadership d. Game theory e. Collusion f. Strategic behavior g. Homogeneous oligopoly h. Price war i. Differentiated oligopoly j. Oligopoly ( ) Five or fewer firms produce most of the output in an industry, or control a large share of the market. ( ) Many consumer goods, like automobiles and sporting goods, are produced by a few firms. ( ) This is when firm’s break from pricing decision...
1. The following graph depicts the demand curve, marginal revenue curve, and marginal cost curve that...
1. The following graph depicts the demand curve,
marginal revenue curve, and marginal cost curve that an oligopolist
faces. The firm is currently charging the cartel price, P*, and
producing the cartel quantity, Q*.
Suppose input prices fall and marginal cost decreases
from MC1 to MC2. Based on this event alone, the firm depicted in
the figure above will
2. Suppose one rental car company raises its prices
and the rival car companies leave their prices unchanged. But when
another...
D Question 19 0.1 pts When supply shifts to the right and demand stays constant, the...
D Question 19 0.1 pts When supply shifts to the right and demand stays constant, the equilibrium price: increases and the equilibrium quantity decreases. increases and the equilibrium quantity increases, decreases and the equilibrium quantity decreases. decreases and the equilibrium quantity increases. stays the same and the equilibrium quantity increases. Question 20 0.1 pts If the price of a good increases, holding all else constant, o the demand for all of that good's substitutes will decrease. the quantity demanded for...
Question 7 5 pts Let's say that you know the following information for an oligopoly firm:...
Question 7 5 pts Let's say that you know the following information for an oligopoly firm: Total Revenue equals $200 million. Variable Costs are $170 million. Fixed Costs equal $20 million. The firm is currently producing 2,000 products at the MC = MR point (and the MC curve is rising). What recommendation do you have for this firm? Assuming the firm's costs remain the same, the firm should produce fewer products in order to decrease its marginal costs. The profit...
a. The kinked-demand curve for oligopolists assumes that rivals will match price cuts and price increases. match price increases, but ignore price cuts. match price cuts, but ignore price increases. neither match price cuts nor price increases. b. There is a gap in the oligopolist's marginal-revenue curve because price drops abruptly. the cost of production changes abruptly. the slope of the demand curve changes abruptly. price rises abruptly. c. The kinked-demand curve explains price rigidity in oligopoly because firms expect any change in price will lower revenue and profits. firms agree to...
4. A kinked demand curve can explain rigidity of oligopolists' administered price. What does inflexible, administered pricing mean? a. b. Why would an oligopolist have little motivation to change its price frequently? In the diagram below, assume that the equilibrium price is at point G. Is this over costs? Is the oligopolist earning economic profit? Explain C. d. At G there is a kink in the effective demand and marginal revenue curves of the oligopolist. Why? i. If it cuts...
The kinked demand curve explains the observation that in oligopoly markets Multiple Choice Rivals match price increases. 0 Prices may not change even in the face of cost increases. 0 Practice product differentiation 0 C) Rivals do not match price reductions 0 O Some companies co not play by the rules
Question 18 1.5 pts An oligopolist operating with a kinked demand curve would expect rivals to match both its price increases and price decreases. True False
Why are oligopoly firms often reluctant to change the price of their product? O They fear that their competitors will follow price decreases but ignore price increases They fear that their competitors will ignore price decreases but follow price increases They know that their competitors will always match their price changes They fear losing sales, because demand is always inelastic in oligopoly markets
1. The following graph depicts the demand curve,
marginal revenue curve, and marginal cost curve that an oligopolist
faces. The firm is currently charging the cartel price, P*, and
producing the cartel quantity, Q*.
Suppose input prices fall and marginal cost decreases
from MC1 to MC2. Based on this event alone, the firm depicted in
the figure above will
2. Suppose one rental car company raises its prices
and the rival car companies leave their prices unchanged. But when
another...
D Question 19 0.1 pts When supply shifts to the right and demand stays constant, the equilibrium price: increases and the equilibrium quantity decreases. increases and the equilibrium quantity increases, decreases and the equilibrium quantity decreases. decreases and the equilibrium quantity increases. stays the same and the equilibrium quantity increases. Question 20 0.1 pts If the price of a good increases, holding all else constant, o the demand for all of that good's substitutes will decrease. the quantity demanded for...
Question 7 5 pts Let's say that you know the following information for an oligopoly firm: Total Revenue equals $200 million. Variable Costs are $170 million. Fixed Costs equal $20 million. The firm is currently producing 2,000 products at the MC = MR point (and the MC curve is rising). What recommendation do you have for this firm? Assuming the firm's costs remain the same, the firm should produce fewer products in order to decrease its marginal costs. The profit...
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