It is difficult to explain how firms behave in an oligopoly because
a. they produce differentiated products
b. there are many suppliers and few buyers
c. they do not attempt to maximize profits
d. each takes into account the behavior of other firms when making pricing decisions
e. there are no barriers to entry or exit
D
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Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation?
A) Both firm X and firm Y choose not to advertise. B) Both firm X and firm Y choose to advertise. C) Firm X chooses to advertise while firm Y chooses not to advertise. D) Firm X chooses not to advertise while firm Y chooses to advertise.
To serve the public interest, government sometimes promotes competition by breaking up natural monopolies
a. True b. False
A price floor would be established in cases where the government believed the market equilibrium price would:
a. result in a surplus. b. be too high. c. result in a shortage. d. be too low. e. yield excess profits.
A consequence of adverse selection is:
A. buyers make irrational decisions because they lack information. B. sellers gain surplus they would have lost with complete information. C. transactions do not take place that would have been possible if the parties had the same information. D. buyers gain surplus they would have lost with complete information.