Purchase Solution

Economics Review Questions: Oligopoly and Game Theory

Not what you're looking for?

Ask Custom Question

Do the firms in an oligopoly act independently or interdependently? Explain your answer.

A monopolistically competitive firm has the following demand and cost structure in the short run:

OutPut Price FC VC TC TR Profit/Loss

0 $90 $90 $0 _ _ _
1 80 _ 40 _ _ _
2 70 _ 80 _ _ _
3 60 _ 140 _ _ _
4 50 _ 220 _ _ _
5 40 _ 320 _ _ _
6 30 _ 440 _ _ _
7 20 _ 580 _ _ _

a. Complete the table.
b. What level of output maximizes profit or minimizes loss?
c. Should this firm operate or shut down in the short run? Why?

3. Suppose that Wal-World and Tarbo are independently deciding whether to implement a new bar code technology. It is less costly for their suppliers to use one system and the following payoff matrix shows the profits per year for each company resulting from the interaction of their strategies.

a. Briefly explain whether Wal-World has a dominant strategy.
b. Briefly explain whether Tarbo has a dominant strategy.
c. Briefly explain whether there is a Nash equilibrium in this game.

(the attachment is for question 3)

Purchase this Solution

Solution Summary

This solution gives detailed answers to three microeconomics review questions about oligopoly, monopolistic competition, game theory and Nash equilibria.

Solution Preview

1. Interdependently. That means that actions taken by one firm have an impact on all the other firms in the industry. Each firm's market share is so large that any increase in market share will hurt its competitors. The result is that all ...

Purchase this Solution

Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.