The table below shows the payoffs associated with two firms, A and B, in an olig

Question

The table below shows the payoffs associated with two firms, A and B, in an oligopoly where each firm chooses to collude or compete. Use the table for the next two questions Collude Produce 20m Compete Produce 35m A: $200m profits A: $300 profits Collude Produce 30mB:$300m profits 8: $170m profits FIRM B. A: $50 m profits A: $100 profits Compete Produce 50mB:$400m profits B: $200m 6. Given the payoffs shown in the matrix, firm B should (A) Always choose to compete, regardless of firm A's action (B) Always choose to collude, regardless of firm A's action (C) Compete if firm A competes, collude if firm A colludes* (D) Compete if firm A colludes, collude if firm A competes* 7. What is the Nash equilibrium?* (A) Both firms choose to collude (B) Firm A chooses to collude, while firm B chooses to compete (C) Firm A chooses to compete, while firm B chooses to collude (D) Both firms choose to compete 8. Which of these industries best represents an oligopoly?*' (A) A local water industry*' (B) The global oil industrye (C) The national craft beer industry* (D) The global wheat industry 9. Which of the following statements is FALSE about the price leadership model for oligopolies?+ (A) The firm that is the leader in its sector determines the price of the good/service. (B) The leader's rivals have little choice but to follow its lead and match its price to hold onto their market shares.- (C) Competitors of the leading firm may choose to set their prices lower than the leader's in the hope of gaining market share as discounters. (D) Price leadership is a form of tacit collusion.* 10. Which of the following traits of perfectly competitive industries also represent monopolistic competition?' i. Firms face perfectly elastic demand curves. ii. The industry has many producers and many consumers.* iii. Firms are price-takers.* ir. In the long run, firms earn zero economic profits. (A) & iii- (B) ii & ive (D) ii & iw

Explanation / Answer

6)- The option (a) is correct that is always to compete regardless of firm's action. in both cases its higher profit than A firm if B compete.

7)-The option (a) is correct both firms choose to collude. because overall or joint profit maximizes.

8)-The global oil industry is the best example.

9)- The option ( c ) is correct.

10)- The option (a) is correct.

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