Explain the collusive pricing model of oligopoly behavior
What will be an ideal response?
The collusive pricing model is similar to the pure monopolist model of pricing. In this case, firms collude and act as one firm to set price and output that maximize joint profits of all firms. The methods of collusion may be overt, as in the OPEC oil cartel, or they may be covert as in “a tacit understanding.” There are also a number of obstacles to collusion that make it difficult to sustain over time: differences in demand and costs for firms; the number of firms in an agreement; incentives to cheat; changing economic conditions; entry by other firms; and legal restrictions and penalties.
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Which is necessarily true for a perfectly competitive firm in short-run equilibrium?
A. Price minus average total cost equals zero. B. Marginal revenue is zero. C. Marginal revenue minus marginal cost equals zero. D. Total revenue minus total cost equals zero.
A good has a downward-sloping demand curve and a perfectly elastic supply. Imposing a sales tax of $1 per unit on the sellers of the good
A) raises the price paid by demanders by more than $1.00. B) raises the price paid by demanders by $1.00. C) raises the price paid by demanders by less than $1.00. D) does not change the price paid by demanders.
Economic profits are equal to
A) total revenues minus total fixed costs. B) total revenues, after tax, minus cost of goods sold. C) total revenues minus the implicit and explicit costs of all inputs used. D) total revenues minus the opportunity cost of labor.
If Bratty Brad decides not to hit Mousey Mike, what would Mousey Mike's best response be?
a. Tell b. Not tell c. Run d. Hide