Chapter 17 - Oligopoly

Question 1

Oligopoly

Answer 1

• a market structure in which only a few sellers offer similar or identical products

Question 2

Duopoly

Answer 2

• an oligopoly with only two firms

Question 3

Collusion

Answer 3

• a possible outcome in oligopoly

- 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
• these are difficult to form as often times firms will renege on agreements to earn more profit (even though they stand to earn more profit together)

Question 5

Nash Equilibrium

Answer 5

• a situation in which economic participants interacting with one another each chose their best strategy given the strategies all others have chosen

Question 6

Increasing Output in Oligopoly

Answer 6

• Has two outcomes: Output & Price Effects
• Output Effect: selling more output raises profits
• Price Effect: selling more output reduces P and profit

if output effect > price effect = increase production
if output effect

Question 7

Public Policy & Oligopoly

Answer 7

• promote competition

- prevent cooperation