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32 terms

Microeconomics Chapter 11 (3)

STUDY
PLAY
two firms (A and B), no collusion, a given market price and output
The assumptions of a kinked demand curve model in oligopoly are __________________________.
rival firm B reacts to a price change in firm A
The shape of a oligopolist's demand curve depends on how the
highly inelastic
In a kinked demand curve model, if rival firm B will match price change, then firm A's demand curve will be _________.
highly elastic
In a kinked demand curve model, if rival B ignores a price change, firm A's demand curve will be __________.
matched by rival firm A
A kinked demand curve model has behavioral assumptions. Price cuts will be _________________.
ignored by rival firm B
A kinked demand curve model has behavioral assumptions. Price increases will be _______________.
elastic, inelastic
In a kinked demand curve model, the shape of firm A's demand curve will be relatively ______ above the kink and relatively _________ below the kink.
given market price
The will be a kink in the shape of firm A's demand curve at the ___________.
discontinuous
In a kinked demand curve model, the shape of firm A's marginal revenue curve will be ________.
gap, the given output level
In a kinked demand curve model, the shape of firm A's marginal revenue curve will have a _____ at ___________.
price stability or rigidity
The major prediction of kinked demand curve models are that it explains __________________ which is often observed in oligopoly markets.
the profit maximizing price and output
A prediction of the kinked demand curve model is that unit costs rise or fall within limits (gaps) without affecting _______________.
market price
The shortcoming of a kinked demand curve model is that it does not explain how given or going ______________ is initially determined.
cartel
A formal written agreement among firms to control price and production is called a ________.
maximize joint profit
Cartels behave like a monopoly in that they set a common price to ______________ of their members.
anti-trust
In the US, cartels are a violation of ____________ laws.
OPEC
An oil cartel is _______.
collusion
Informal Understandings is a informal type of _______.
tacit understandings and gentlemen's agreements
Informal understandings are also known as _________________.
there is no written agreement
Informal understandings are illegal, but difficult to detect because _____________.
collusion
Price leadership is an informal type of ________.
written, verbal
Price leadership means no _______ or _________ agreement.
largest firm in the industry
The leader in price leadership is usually the ______________.
in the industry follow.
In price leadership, when the leader changes price, other firms _____________.
cheating, different demand and cost curves, recession, number of firms, entry of new firms
The obstacles of collusion are __________________________________.
below the agreed upon price
Cheating occurs when a firm changes a price _____________.
secret price concessions
In cheating, an individual firm may find it profitable to make_______________ to selected to selected buyers to increase sales.
breakup
If a significant number of firms cheat, a collusive oligopoly will _____.
to agree on a single price
Demand and cost curves may differ substantially, making it difficult ___________________.
recession
When the economy is in _________, firms may reduce price to avoid declining sales.
collusion
The larger the number of firms, the more difficult it is for _______.
the price and profit of existing firms
If barriers to entry are insignificant, then the potential entry of new firms reduce ____________________.