Question

True or false 15) Microsoft was charged with violating the antitrust laws not because it had...

True or false

15) Microsoft was charged with violating the antitrust laws not because it had a virtual monopoly in the form of its Windows operating system, but because it acted like a monopolist in trying to control the market for certain software applications.
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16) Mutual interdependence among firms is one of the key characteristics of an oligopoly market that distinguishes it from the other three major market structures.
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17) One of the surprising conclusions of many of the noncooperative models of oligopoly is that firms end up better off with the noncooperative outcome than they would by cooperating with one another.
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18) In the prisoner's dilemma game, each player's dominant strategy is also the Nash equilibrium.
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19) Because there is no formal agreement among the participating firms, firms that engage in tacit collusion are exempt from prosecution under the anti-trust laws.
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20) A firm acting as a price leader would never reduce market price because this would clearly make all of the firms in the market worse off and defeat the purpose of having a firm act as the price leader.
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21) Applying a uniform markup to set the price of the various products sold by a firm is more profitable than varying the markup based on differences in the price elasticity of demand for the firm's products.
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22) In the case of a perfectly competitive firm, the optimal markup over marginal cost is 0 percent.
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23) Unlike markup pricing, the strategy of price discrimination is totally independent of the price elasticity of demand for the good in question.
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24) The goal of "personalized pricing" is to determine how much each individual customer is willing to pay for a product. As such, it is an application of first-degree price discrimination.
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25) When the macroeconomy is doing poorly (as it was in 2009), profits of existing firms decrease, creating an incentive for existing firms to exit unprofitable markets. This in turn makes it more difficult for the remaining firms to mark-up price over average or marginal cost.
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Homework Answers

Answer #1

15. False - Microsoft had a virtual monopoly with its operating system.

16. True - Mutual interdependence is a key characteristic of an oligopoly.

17. False - Firms do not end up with better outcomes in the nonco-operative models.

18. True - Any dominant strategy equilibrium is always a Nash equilibrium.

19. True - Tacit collusion is not unlawful by itself.

20. False - A price leader can change prices, as per market conditions.

21. False - Varying the markup based on differences in the price elasticity of demand for the firm's products, is more profitable than applying a uniform markup.

22. True - In case of a perfectly competitive firm, the optimal markup over marginal cost is zero.

23. False - Price discrimination does depend on the price elasticity of demand for the good.

24. True - Personalized pricing is an application of first-degree price discrimination.

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