Game theory is used in a number of areas in economics. What is the primary reason that it is used in analyzing oligopoly type market structures?
a. The firms are producing a similar product
b. The firms are producing differentiated products
c. The demand curve facing the oligopolistic firms is perfectly inelastic
d. The mutual interdependence of firms in industries with a small number of firms
e. The demand curve the oligopolistic firm faces is downward sloping
D
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In monopolistic competition, profits well in excess of costs are unlikely because _____.
(A) Customers always return to the product that is least expensive, even if the quality of that product is much lower. (B) Established rivals and new firms would lure customers away with slightly different and/or cheaper products. (C) Excess output can be maintained only for short periods. (D) Nonprice competition only works for the short term.
If the MPS in an economy is .1, government could shift the aggregate demand curve rightward by $40 billion by:
A. increasing government spending by $4 billion. B. increasing government spending by $40 billion. C. decreasing taxes by $4 billion. D. increasing taxes by $4 billion.