Chapter 17

Question 1

oligopoly

Answer 1

few sellers, similar or identical products

Question 2

duopoly

Answer 2

only two members

Question 3

collusion

Answer 3

an agreement among firms in a market about quantities to produce or prices to charge

Question 4

cartel

Answer 4

a group of firms acting in unison

Question 5

nash equilibrium

Answer 5

game theory where the optimal outcome of a game is one where no player has incentive to deviate from his or her chosen strategy after considering an opponents choice

Question 6

increasing the number of sellers affects the price and quantity: (2)

Answer 6

1. output effect: selling more at the going price raises profits
2. price effect: raising production increases amount sold but lowers price and therefore profits on units sold

Question 7

game theory

Answer 7

the study of how people behave in strategic situations

Question 8

prisoners dilemma

Answer 8

each person pursing their own interest, outcome can be worse for each

Question 9

3 examples of prisoners dilemma

Answer 9

1. arms race
2. advertising
3. common resources

Question 10

controversies over competition policy

Answer 10

1. resale price maintenance
2. predatory pricing
3. tying

Question 11

resale price maintenance

Answer 11

occurs when suppliers require retailers to charge a specific amount

Question 12

predatory pricing

Answer 12

occurs when a large firm begins to cut the price of its products with the inert of driving its competitors out of the market

Question 13

tying

Answer 13

when a firm offers two or more of its products together at a single price, rather than separately

Question 14

dominant strategy

Answer 14

a strategy that is best for allayer in a game regardless of the strategies chosen by other players