Econ quiz 7

Why are cartels difficult to maintain?

There is inevitable tension between cooperation and self-interest in a cartel.

consider trade relations between Canada and Mexico. assume that the leaders of the two countries believe the payoffs to alternative trade policies are as follows

under no circumstances

In a typical cartel agreement, when does the cartel maximize profit?

when it behaves as a monopolist

As some incumbent firms exit a monopolistically competitive market, what happens to profits of existing firms and product diversity in the market?

Profits of existing firms rise and product diversity in the market decreases.

What is one characteristic of an oligopoly market structure?

Firms in the industry have some degree of market power.

Which of the following is an example of a monopolistically competitive market?

the market for hair cuts

In a monopolistically competitive industry, how does price compare with marginal cost?

Price is above marginal cost since each firm is a price setter.

The concept of a Nash equilibrium, when applied to an oligopoly, relies on the notion that Firm A in an oligopoly chooses its own best strategy based on which consideration?

based on the strategies that other firms have chosen

New firms will necessarily enter a monopolistically competitive market when price exceeds what amount?

ATC