Oligopoly and Market Structure

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What is the main reason for the breakdown in cooperation between the two firms in the Prisoner's Dilemma?

The lack of government regulations

The fear of being exploited by the other firm (correct)

The difference in production costs

The desire to maximize profits

What is the potential outcome if both companies prioritize cost-cutting?

A merger between the two companies

Higher profits for both companies in the long run

Increased market share for both companies

Stagnation in the market due to lack of innovation (correct)

What is the primary benefit of both companies investing in R&D?

Increased market share

Reduced production costs

Improved product quality (correct)

Higher profits in the short term

What is a reason for oligopolistic firms to exhibit price rigidity?

Fear of sparking price wars or retaliatory actions from competitors Signup and view all the answers

What type of market structure is characterized by a small number of firms competing with each other?

Oligopoly Signup and view all the answers

What is the primary reason why mutual awareness is crucial in the Prisoner's Dilemma?

To understand the other firm's strategy Signup and view all the answers

What is an example of a strategic partnership in the aerospace industry?

Companies collaborating on large-scale projects like commercial aircraft development Signup and view all the answers

Why do oligopolistic firms closely monitor their competitors' actions and strategies?

To anticipate and respond to competitive moves promptly Signup and view all the answers

What is NOT a possible outcome of the Prisoner's Dilemma in the context of the two smartphone manufacturers?

Both companies form a joint venture Signup and view all the answers

What is a benefit of government-granted patents to oligopolistic firms?

Temporary monopolies over innovative products or technologies Signup and view all the answers

What is a characteristic of the global oil and gas industry?

Coordination of production levels to stabilize prices Signup and view all the answers

What is a driving force behind the actions of oligopolistic firms in the smartphone industry?

Mutual awareness Signup and view all the answers

What is the primary purpose of antitrust laws?

To protect consumer interests and promote fair competition Signup and view all the answers

Why do oligopolistic firms face difficulties in cooperating with each other?

Because they are unable to sign legally enforceable contracts Signup and view all the answers

What is an alternative strategy for oligopolistic firms to cooperate without violating antitrust laws?

Monitoring each other's production and market behavior Signup and view all the answers

What is a potential outcome of mutual defection in an oligopolistic market?

Suboptimal outcomes for both firms Signup and view all the answers

What is the primary goal of government-granted patents in an oligopolistic market?

To grant exclusive rights to produce a product Signup and view all the answers

What is the significance of mutual awareness in an oligopolistic market?

It allows firms to infer the intentions of their competitors Signup and view all the answers