Deck 15: Using Noncompetitive Market Models

Question 1

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2
Suppose that the market in Figure 15-2 were served by an oligopoly such that the equilibrium output was 450.Then the welfare loss would be _____ as compared to the welfare loss of _____ under monopoly.

A)$37.50;$150
B)$75;$150
C)$37.50;$450
D)$75;$450

Answer 1

A

Question 2

Deadweight losses due to monopoly include:

A)the transfer of producer surplus to consumers.
B)costs of acquiring and maintaining the monopoly position.
C)the redistribution of income in favor of consumers.
D)the excess of actual output over competitive output.

Answer 2

B

Question 3

Refer to Figure 15-1.What is most likely to happen if the market is oligopolistic as compared to a monopolistic market structure?

A)The deadweight loss in the market will be greater.
B)The equilibrium output will be lower.
C)The equilibrium price in the market will be lower.
D)The price and output will remain unchanged.

Answer 3

C

Question 4

Refer to Figure 15-1.Under competitive conditions,what is the equilibrium price and output?

A)P₂ and Q₂
B)P₁ and Q₁
C)P₃ and Q₃
D)F and zero output

Question 5

Refer to Figure 15-1.The monopolist produces output equal to _____ in equilibrium.

A)Q₂
B)Q₁
C)Q₃
D)Q₄

Question 6

Which of the following is a consequence of a monopoly?

A)An expansion of output beyond the efficient level
B)A redistribution of income from consumers to producers
C)A fall in price below the efficient level
D)An increase in the total surplus in the market

Question 7

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2
Based on Figure 15-2,one can conclude that the deadweight loss due to the monopoly is _____.

A)$150
B)$300
C)$450
D)$600

Question 8

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2
Refer to Figure 15-2.Since there is a positive deadweight loss from monopoly,which of the following statements must be true?

A)The gain in producer surplus should not exceed $450.
B)The loss in total surplus should be lesser than or equal to $300.
C)The loss in consumer surplus should not exceed $600.
D)The gain in total surplus should exceed the loss in consumer surplus.

Question 9

The value of the difference between price and marginal cost is a measure of profit per unit only if:

A)marginal cost equals marginal revenue.
B)marginal cost equals average revenue.
C)average cost is greater than marginal revenue.
D)average cost equals marginal cost.

Question 10

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2
Based on Figure 15-2,it can be concluded that the change in consumer surplus due to the shift from perfect competition to monopoly is _____.

A)$150
B)-$300
C)-$450
D)$600

Question 11

The excess of price over marginal cost is not the best measure of profit per unit because:

A)marginal cost is not always equal to average cost.
B)it shows the accounting profit of a firm and not the economic profit.
C)it does not take into account the variable costs of the firm.
D)profitable firms produce at a level where price is less than marginal cost.

Question 12

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2
Based on Figure 15-2,it can be concluded that the change in producer surplus due to the shift from perfect competition to monopoly is _____.

A)-$150
B)-$300
C)$150
D)$300

Question 13

Suppose that the elasticity of demand at a competitive equilibrium is 2.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,one can conclude that the monopoly output is _____ percent below of the competitive output.

A)25
B)40
C)2.5
D)4

Question 14

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2
Suppose that the market in Figure 15-2 were served by an oligopoly such that the equilibrium output was 450.Then the welfare loss under oligopoly would be _____ percent of that under monopoly.

A)400
B)100
C)75
D)25

Question 15

Suppose that at the competitive equilibrium,the elasticity of demand is 1.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,it can be concluded that the monopoly output is _____ percent below the competitive output.

A)67
B)1.5
C)15
D)0.67

Question 16

In order to maximize profits,firms must produce at the lowest possible cost.However when producing at a cost that is higher than necessary:

A)a monopoly firm can continue to operate with lower profits but a competitive firm will have to exit the market.
B)a monopoly firm has the incentive to lower cost and increase profit but a competitive firm will increase price and remain in the market.
C)a monopoly firm will expand output and increase price while a competitive firm will not change output or price.
D)a monopoly firm has the incentive to produce at the lowest cost possible while a competitive firm will only earn a lower economic profit.

Question 17

Which of the following cannot directly be measured when calculating the deadweight loss from a monopoly?

A)The excess of price over marginal cost
B)The number of industries that are monopolistic in nature
C)The magnitude of output restriction
D)The actual output of monopolistic industries

Question 18

The following figure shows the marginal cost [MC],marginal revenue [FH] and demand [FG] curves for a monopolist who faces constant costs.
Figure 15-1
Refer to Figure 15-1.Given that P₁= $100,P₂ = $50,Q₂= 2,000 units,and Q₁=1,000 units,what is the deadweight loss of a monopoly?

A)$10,000
B)$2,000
C)$50,000
D)$25,000

Question 19

Why are the estimates of the deadweight loss of monopoly not large?

A)Monopolized sectors of the economy are large relative to the whole economy.
B)Pure monopolies are not pervasive in market economies.
C)Monopolies tend to operate in markets with below average prices.
D)Although consumer surplus falls,total surplus actually increases in a monopoly.

Question 20

In most models of oligopoly _____.

A)the output is higher than the output in a pure monopoly
B)the price is higher than the price in a pure monopoly
C)the price is lower than the price under perfect competition
D)the output is the same as the output under perfect competition

Question 21

Which of the following is true of monopolies and their incentive to innovate?

A)Monopolies have the incentive to suppress innovation in order to sustain abnormal profits.
B)Monopolies do not have the incentive to innovate,even in the short run,unless they receive patents for their invention.
C)Monopolies do not have the incentive to innovate because they will continue to earn zero economic profits even with innovation.
D)Monopoly firms have the incentive to innovate and introduce new products in order to expand their profit.

Question 22

Which of the following is true of a natural monopoly?

A)The operation of more than one firm reduces the production efficiency of the market.
B)The good that is sold by a natural monopoly is easily substitutable.
C)The firm produces at the point where marginal revenue equals price.
D)The natural monopoly market has no barriers to entry and exit.

Question 23

A monopolist might find it profitable to suppress an innovative new product if:

A)the firm would lose its monopoly status by introducing the invention.
B)it owns all the sources of supply of the inputs used in the production process.
C)it could prevent other firms from copying the invention.
D)the projected demand for the product is inelastic.

Question 24

Increasing competition in a market characterized by natural monopoly would:

A)increase output and lower prices,increasing efficiency in production.
B)result in an inefficient outcome as the real cost of production will be too high.
C)increase the number of units sold as well as the profits of the monopolist.
D)lower the average cost of production for all firms in the market.

Question 25

Assume that Bosch is a company that manufactures printers for home computers.The printers are designed such that they do not work as effectively after a certain number of prints have been taken.Bosch also offers a warranty on the printer equal to the average time it takes to print that many pages.This is an example of _____.

A)iterated dominance
B)planned obsolescence
C)a commitment strategy
D)a natural monopoly

Question 26

Which of the following,if true,is the best example of a natural monopoly?

A)The oil distribution industry where one distribution network serves the whole market
B)The pharmaceutical industry where patents form a barrier to entry
C)The beverages industry where the cost of capital is high and variable costs are low
D)The hospitality industry where variable costs are higher than fixed costs

Question 27

When a company practices planned obsolescence,it _____.

A)produces a product that is of a higher quality at a much lower cost
B)does not produce goods that are expected to last for a long period of time
C)recalls goods for which demand has fallen significantly in the market
D)differentiates its product slightly and sells the product at a much higher price

Question 28

Figure 15-4 shows the profit-maximizing output and price of monopolist.
Refer to Figure 15.4.Given that the monopolist is producing the profit-maximizing level of output,what is the maximum amount of revenue that the monopolist can give up and still remain in business?

A)ABCD
B)ABFE
C)BGF
D)EFQ₂0

Question 29

Which of the following statements correctly identifies the problem with regulating a natural monopoly?

A)It is difficult to identify a natural monopoly.
B)If a natural monopoly lowers its prices,it will have to shut down to cut losses.
C)The real cost of serving the market will be higher if there is more than one firm.
D)The cost of regulating a natural monopoly is lower than the welfare cost.

Question 30

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
In Figure 15-3,if the maximum price allowed in the market is P₁,output levels below Q₁ will:

A)yield more economic profit than at Q₁.
B)yield positive but lesser economic profit than at Q₁.
C)yield negative economic profit.
D)yield zero economic profit.

Question 31

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
In Figure 15-3,if the monopoly is forced to use the average-cost pricing policy,it would:

A)produce Q2 at a price P3 and make zero economic profit.
B)produce Q3 at a price P4 and make positive economic profit.
C)produce Q1 at a price P1 and make zero economic profit.
D)produce Q2 at a price P3 and make positive economic profit.

Question 32

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
In Figure 15-3,if the maximum price allowed is P₁,the firm will produce a quantity equal to_____.

A)Q1
B)Q2
C)Q3
D)0

Question 33

Until 1992,WordPerfect produced the dominant word processing system for the personal computer [PC] platform.After 1992,Microsoft's Word for Windows dominated the PC platform,largely by offering consumers a better program at a much lower price.This example illustrates:

A)the dynamic view of a natural monopoly.
B)the need for government regulation of a monopoly market.
C)how a lack of competition produces instability in markets.
D)the inefficiency of a monopoly in the word processing market.

Question 34

When the average cost curve declines after intersecting the demand curve for a natural monopoly,which of the following must necessarily be true?

A)The marginal cost curve lies below the average cost curve at the point of intersection.
B)Marginal cost is also declining after the point of intersection.
C)The average cost curve and the marginal cost curve are parallel after the point of intersection.
D)The price is equal to marginal cost

Question 35

Which of the following,if true,would be considered a natural monopoly?

A)The pharmaceuticals industry where patents form a barrier to entry
B)The airlines industry that has high fixed costs and high operating costs
C)The software industry that has very low marginal costs
D)The utilities industry that has falling average costs over the entire range of output

Question 36

The following figure shows the marginal cost [MC],marginal revenue [FH] and demand [FG] curves for a monopolist who faces constant costs.
Figure 15-1
Refer to Figure 15-1.If the regulator sets a maximum price of P₂,the monopolist's demand curve is _____.

A)P₂EG
B)FG
C)the marginal cost curve
D)FH

Question 37

For a natural monopoly where average cost declines after intersecting the demand curve,marginal-cost pricing would lead to:

A)a horizontal demand curve.
B)a surplus and a consequent fall in price.
C)an economic loss for the firm.
D)a higher price than under average-cost pricing.

Question 38

Which of the following is not likely to be a social loss due to monopoly power?

A)The welfare loss from the suppression of innovative products by monopolists
B)The higher production costs incurred by a monopolist due to the lack of competition
C)The resources spent by monopolists to secure their monopoly privilege
D)The loss incurred due to marginal-cost pricing by the monopolist

Question 39

A natural monopoly is defined as an industry in which:

A)regulatory barriers to entry prevent the operation of more than one firm.
B)the marginal cost curve of the dominant firm is upward sloping.
C)the monopoly firm is not regulated by the government.
D)the average cost of the firm declines over the entire range of market demand.

Question 40

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
Refer to Figure 15-3.Which of the following price and output combinations would an unregulated monopolist choose?

A)P2,Q2
B)P1,Q1
C)P3,Q2
D)P4,Q3

Question 41

The following payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff.
Table 15-1
Refer to Table 15-1.If X = 145 and Y = 62,it is evident that _____.

A)both firms have a dominant strategy.
B)neither firm has a dominant strategy.
C)only company C has a dominant strategy.
D)only company D has a dominant strategy.

Question 42

One of the practical difficulties in regulating a natural monopoly using average-cost pricing is:

A)that the average-cost pricing rule leads to losses which must be subsidized.
B)that the price ceiling from average-cost pricing is likely to result in shortages.
C)that the monopoly has no incentive to minimize costs.
D)it will result in a surplus in the market leading to a drastic fall in the price.

Question 43

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
In Figure 15-3,under marginal-cost pricing,a firm would require a government subsidy of at least _____ to remain profitable.

A)P₃CBP₂
B)P₁AFP₂
C)P₃CQ₂O
D)FBQ₂Q₁

Question 44

Which of the following is true of public ownership of a natural monopoly?

A)Most publicly owned natural monopolies run economic losses.
B)In publicly owned monopolies,the incentive to minimize cost is higher.
C)Public ownership of natural monopolies reduces production efficiency in the market.
D)Natural monopolies that are publicly owned tend to innovate and create cost-saving technologies.

Question 45

The following payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff.
Table 15-1
Refer to Table 15-1.If X = 135 and Y = 75,the method of iterated dominance can be used to conclude that company C's strategy of choosing a _____ price is dominated by a strategy of a _____ price.

A)high;low
B)medium;low
C)low;medium
D)high;medium

Question 46

Which of the following is true of a natural monopoly that is regulated by the average-cost pricing strategy?

A)The natural monopoly will earn positive economic profit.
B)The natural monopoly will produce less output than an unregulated monopoly.
C)The equilibrium price of the natural monopoly is now the same as the competitive price.
D)A part of the deadweight loss from an unregulated monopoly is eliminated.

Question 47

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
Refer to Figure 15-3.If the firm practices marginal-cost pricing,the equilibrium price would be _____.

A)P₁
B)P₂
C)P₃
D)P₄

Question 48

In game theory,the concept of _____ can be used to arrive at an equilibrium in a game with no dominant strategies.

A)multiple iterations
B)non-cooperation
C)iterated dominance
D)best response

Question 49

Which of the following is not a problem associated with regulation of a natural monopoly?

A)Regulation using average-cost pricing reduces a firm's incentive to keep costs down.
B)Regulation stifles the incentive that firms have to innovate.
C)Regulators do not have full information about a firm's demand and cost functions.
D)Regulation increases collusion and cartelization among firms.

Question 50

The following payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff.
Table 15-1
Refer to Table 15-1.If X = 145 and Y = 75,company D's strategy of choosing a _____ price is dominated by a strategy of _____ price.

A)high;low
B)medium;high
C)medium;low
D)high;medium

Question 51

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
Table 15-2
Refer to Table 15-2.Which of the following is true?

A)Company B's dominant strategy is to set a high price.
B)Company B's dominant strategy is to set a medium price.
C)Company B's dominant strategy is to set a low price.
D)Company B does not have a dominant strategy.

Question 52

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3
In Figure 15-3,under marginal-cost pricing,the monopoly would earn:

A)negative economic profit equal to P₃CBP₂.
B)positive economic profit equal to P₂BQ₂O.
C)negative economic profit equal to FBQ₂Q₁.
D)positive economic profit equal to FCQ₂Q₁.

Question 53

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
Table 15-2
In Table 15-2,company B's strategy of choosing a _____ price is iteratively dominated by a strategy of _____ price.

A)low;high
B)medium;high
C)medium;low
D)high;low

Question 54

Which of the following will be true if a regulator uses average-cost pricing to regulate a natural monopoly?

A)The natural monopoly will incur losses.
B)The output will be lower than that of an unregulated monopoly.
C)There will be an efficiency gain in the market.
D)The firm will benefit more than the consumers.

Question 55

Which of the following is necessary for a Nash equilibrium in a two-player game where both players have three strategies each?

A)The players should behave altruistically.
B)At least one of the two players should have a dominant strategy.
C)The game should be simultaneous and not sequential.
D)It is not necessary for either player to have a dominant strategy.

Question 56

Which of the following is not a problem faced by regulators while regulating a natural monopoly such as cable television or electric utility company?

A)Regulators lack sufficient information regarding the monopolists cost structure.
B)Regulation reduces the incentive for the monopolist to reduce costs.
C)Regulation may cause the monopolist to suppress innovation and new product development.
D)Regulation of a monopoly usually leads to a decline in total surplus.

Question 57

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
Table 15-2
Refer to Table 15-2.Which of the following is true?

A)Company A's dominant strategy is to set a high price.
B)Company A's dominant strategy is to set a medium price.
C)Company A's dominant strategy is to set a low price.
D)Company A does not have a dominant strategy.

Question 58

What is meant by iterated dominance?

A)It refers to the process of co-operation among players to maximize the total payoff.
B)It refers to the elimination of a strategy that is dominated by another strategy in a game.
C)It refers to games in which players make decisions in a sequential manner.
D)It is a strategy that is employed by one player without observing the strategies of other players.

Question 59

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3
Refer to Table 15-3.What is Abbott's dominant strategy?

A)Abbott does not have a dominant strategy.
B)Abbott's dominant strategy is selling at a high price.
C)Abbott's dominant strategy is selling at a low price.
D)Abbott's dominant strategy is selling at a medium price.

Question 60

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
Table 15-2
In Table 15-2,company A's strategy of choosing a _____ price is dominated by a strategy of _____ price.

A)low;medium
B)medium;high
C)high;low
D)high;medium

Question 61

What is a natural monopoly? Draw a diagram to illustrate the profit-maximizing output of a natural monopoly.

Question 62

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3
Refer to Table 15-3.What is the highest payoff from Abbott's dominated strategy?

A)$100
B)$115
C)$107
D)$60

Question 63

Which of the following is true of a Nash equilibrium?

A)At least one of the players need to have a dominant strategy to arrive at a Nash equilibrium.
B)In a Nash equilibrium,one player has an incentive to change his strategy in order to increase his profit.
C)Each player's strategy in a Nash equilibrium is the best possible strategy given the strategy of the other player.
D)In order to arrive at a Nash equilibrium,it is necessary for both players to credibly commit to a course of action.

Question 64

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3
Refer to Table 15-3.When Costello chooses the low-pricing strategy,Abbott's highest possible profit is:

A)$50
B)$21
C)$107
D)$115

Question 65

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3
Refer to Table 15-3.When Abbott chooses the high-pricing strategy,Costello's highest possible profit is:

A)$115
B)$100
C)$107
D)$21

Question 66

Assume that Costco Chemicals is a chemical manufacturer located in the U.S.that serves almost the entire market.Based on Costco's market share,antitrust enforcement authorities allege that Costco has monopoly power and is exploiting this monopoly power at the cost of buyers.Assume that Costco hires you as a lawyer to present their case.How would you argue in favor of Costco?

Question 67

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3
Refer to Table 15-3.What is the highest payoff in Costello's dominated strategy?

A)$107
B)$115
C)$100
D)$21

Question 68

Mike and Bill face the following payoff matrix. What is the outcome of the game?

Question 69

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
Table 15-2
Refer to Table 15-2.Suppose that company A makes a credible commitment not to be undersold by company B.Then it is most likely that the companies A and B will:

A)both choose the high-price strategy.
B)both choose the medium-price strategy.
C)both choose the low-price strategy.
D)choose the low price strategy and high price strategy respectively.

Question 70

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
Table 15-2
Refer to Table 15-2.Using iterated dominance,one can conclude that in equilibrium:

A)company A chooses a high price and company B chooses a medium price.
B)both company A and company B choose a high price.
C)both company A and company B choose a medium price.
D)company A chooses a medium price and company B chooses a high price.

Question 71

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3
Refer to Table 15-3.Using the method of iterated dominance it can be concluded that the outcome of the given payoff matrix is:

A)a dominant-strategy equilibrium.
B)indeterminate as there are no dominant strategies.
C)both players choosing a low pricing strategy.
D)both players choosing a high pricing strategy.

Question 72

Intellectual property rights are protected by patents.One of the controversial aspects of the patent system is the patents that are granted to pharmaceutical companies.Critics of the patent system claim that these increase the price of life-saving drugs and make them unaffordable to the poor.For example,patents restrict the availability of AIDS medicine in developing countries that require them the most.What would happen if drugs were not allowed to be patented in the interests of increasing their availability at a lower price? How do the long-run and short-run effects differ?

Question 73

Antitrust laws state that the practice of predatory pricing is illegal as it allows the firm to consolidate monopoly power by driving other firms out of the market.What might be the challenges that a regulator may face while trying to prosecute a firm that is said to practice predatory pricing? (Predatory pricing is a pricing strategy where a firm prices a product below average variable cost (or short-run marginal cost)to drive rival firms out of the market)

Question 74

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3
Refer to Table 15-3.When the concept of iterated dominance is used,Abbott and Costello will:

A)not arrive at a unique pricing strategy.
B)use the medium-pricing strategy.
C)use the high-pricing strategy.
D)use the low-pricing strategy.

Question 75

Two diners,that are located close to each other,compete aggressively for customers.One of their main strategies is the 'daily special' that they use to draw customers.The following payoff matrix shows how many customers they attract per day if their daily special is either beef stew [B],pot roast [P],or salmon pie [S]. What daily special will be chosen by Diner A and Diner B in equilibrium if they agree not to benefit at each other's expense??

Question 76

(

A)Define and illustrate graphically average-cost pricing and marginal-cost pricing.

Question 77

Define and illustrate iterated dominance and commitment strategy.

Question 78

Refco is company that manufactures parts of a car engine for two major car manufacturers.It decides to shut down an assembly line that produces parts that are specially tailored for one of the car manufacturers.The other manufacturer then increases its order for parts made by Refco.In this example,Refco was practicing a _____.

A)loss leader strategy
B)price gouging strategy
C)commitment strategy
D)cost plus pricing strategy