Game Theory Can Be Used to Demonstrate That Oligopolists

question 208

Multiple Choice

Game theory can be used to demonstrate that oligopolists

• A) rarely consider the potential reactions of rivals.
• B) experience economies of scale.
• C) can increase their profits through collusion.
• D) may be either homogeneous or differentiated.

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Definitions:

Dominant Firm

A company that has a large majority share of the market and can significantly influence the market price and competition.

Market Demand Curve

A graphical representation showing the relationship between the quantity of a good consumers are willing and able to purchase and the price of the good.

Profit-maximizing Output

The level of production at which a business achieves the highest possible profit.

Cournot Model

An economic model used to describe an industry structure in which companies compete on the amount of output they will produce, which they decide upon independently of each other and at the same time.