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QUESTION 1 - 7.1 Coke and Pepsi are the two dominant firms in the carbonated beverage...

QUESTION 1 - 7.1

Coke and Pepsi are the two dominant firms in the carbonated beverage oligopoly. What type of oligopoly best describes their relationship?

Cooperative

Noncooperative

QUESTION 2 - 7.1

Which of the following is a key outcome from the kinked demand model of noncooperative oligopoly?

The firm's marginal cost curve has a kink in its middle

Firms do not seek to maximize profits

Rival firms respond quickly if a particular firm raises its price

The product price will be sticky or unresponsive to some changes in the market situation

QUESTION 3 - 7.1

What is the objective of limit pricing behavior?

Raise prices to the highest limit or amount that consumers are willing to pay

Keep existing competitors from exiting the market

Prevent new firms from entering a market

Divide the market share among firms in a cartel

QUESTION 4 - 7.1

Please refer to Exercise 2 at the end of Chapter 9. Do either of the firms have a dominant strategy?

Neither firm has a dominant strategy in this game

The dominant strategy for both firms is High price

The dominant strategy for both firms is Low price

The dominant strategies are Low for Firm 1 and High for Firm 2
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Answer #1

Question 1

Answer : Coke and Pepsi are the two dominant firms in the carbonated beverage oligopoly and Noncooperative type of oligopoly best describes their relationship. As in cooperative oligopoly, firms mutualy decide price and output or follow an aggrement and also don't compete with each other but in noncooperative oligopoly, firms do not have any agreement and compete with each other on price to get more customer and profit.

Question 2

Answer : The product price will be sticky or unresponsive to some changes in the market situation is key outcome from the kinked demand model of noncooperative oligopoly.

Question 3

Answer : Prevent new firms from entering a market is the objective of limit pricing behavior. Also keep existing competitors from exiting the market is also one objective as common but main objective is to prevent new firms from entering a market

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