What conclusions can be drawn from the game theory view of oligopoly?
What will be an ideal response?
There are three basic conclusions that can be drawn. First, firms in an monopolistic industry are “mutually interdependent” and must consider the actions of rivals when they make pricing decisions. Second, oligopoly often leads to overt or covert collusion among the firms to fix prices or to coordinate pricing because competition often results in lower prices and profits. Collusion can help maintain higher prices and profits. Third, collusion creates incentives for firms to cheat on collusive agreements because higher profits can be made if a firm can successfully cheat on an agreement while the other firms maintain their prices.
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The market clearing price of a good is
A) the price at which there is at least some of the good available for everyone. B) the price at which there is no surplus and no shortage. C) the price that consumers prefer. D) the price that producers prefer.
When the government is the sole depository of foreign currencies and exercises complete control over how these currencies may be used, this
a. is a violation of International Monetary Fund regulations for member countries because it denies the right of market forces to determine exchange rates b. creates equilibrium in the foreign exchange market which would otherwise not occur c. is an example of exchange controls that allow a government to maintain a fixed exchange rate d. is necessary in a floating exchange rate system to keep the market in equilibrium e. stimulates international trade because it eliminates all the uncertainty associated with floating exchange rates