8.

6 Overcoming the Dupolists’ Dilemma

1)
A firm announces that it will refund the difference between its price and any
price of a competitor that is lower. This is an example of
A)
predatory pricing.
B)
tying contracting.
C)
marginal cost pricing.
D)
guaranteed price matching.
2)
A firm that faces the duopolists’ dilemma can avoid the dilemma by
A)
telling customers that it will match any competitor’s price.
B)
undercutting its competitor’s price.
C)
agreeing to join a cartel.
D)
always choosing its dominant strategy regardless of the other firm’s action.
3)
If a firm engages in guaranteed price matching, that firm picks a
A)
high price but instantly switches to a low price if its competitors choose a
low price.
B)
low price but instantly switches to a high price if its competitors choose a
low price.
C)
high price but instantly switches to a low price if its competitors choose a
high price.
D)
low price no matter what the competition does.
4)
In a duopoly, one firm’s low-price guarantee
A)
eliminates the other firm’s incentive to undercut the first firm’s price.
B)
encourages the other firm to cut its prices.
C)
guarantees that consumers will pay the lowest price possible.
D)
is ineffective because firms always have an incentive to break their
agreements.
5)
One method firms can use to solve the duopolists’ dilemma is to engage in
A)
predatory pricing.
B)
tying contracting.
C)
marginal cost pricing.
D)
guaranteed price matching.
6)
Suppose Kevin offers to match his competitors’ prices in an oligopoly market.
This will have the effect of
A)
providing consumers with the lowest possible price.
B)
decreasing his competitors’ incentive to reduce price.
C)
driving out his competition.
D)
triggering an antitrust investigation.
7)
The rational outcome of a guaranteed price matching or “meet-the-competition”
policy is that
A)
both firms will sell at the low price.
B)
one firm will sell at a low price and the competitor will sell at a high price.
C)
both firms will sell at the high price.
D)
consumers will be better off.
8)
If firms follow a low-price guarantee strategy, the price that will prevail in
the market will be closest to
A)
the price a monopolist will pick.
B)
the price that a perfectly competitive firm would pick.
C)
the duopoly price.
D)
the price that would yield zero economic profits.
9)
Price-fixing by firms in an oligopoly is
A)
more likely when the firms play a game repeatedly.
B)
more likely when firms must commit to a single pricing strategy for the
lifetime of the firm.
C)
more likely when neither firm chooses the low-price guarantee strategy.
D)
never sustainable because firms have an incentive to underprice each other.
10)
What makes a grim trigger strategy “grim” is
A)
if one player overprices, then the other overprices to the point of zero
quantity demanded.
B)
if one player underprices, then the other player notifies the Federal Trade
Commission.
C)
if one player underprices, then the other player is driven out of the market.
D)
if one player underprices, then the other player drops the price so far that
profits for both firms are zero.
 

ANSWER IS :-

ANSWER IS :-

1.

D)
guaranteed price matching.

A PMG (Price Match Guaranty )is basically a commitment by the retailer to discount the
distinction if the client, post-buy, finds a lower cost somewhere else. PMGs have been utilized in
both discount and customer markets by significant retailers around the world, like Walmart,
Tesco, and Best Buy to give some examples.

2.

D)
always choosing its dominant strategy regardless of the other firm’s action.

If one company working in an oligopoly raises its charge and every other a hit cartelization calls
for two traits: call for need to be inelastic, and the cartel ought to be capable of control maximum
of the deliver. OPEC succeeded inside the brief run because the quick-run call for and deliver of
oil had been each inelastic.

3.

C)
high price but instantly switches to a low price if its competitors choose a high price.

It should be incredibly troublesome, on the off chance that certainly feasible, for one shopper to
exchange an item to another. First-degree cost segregation, on the other hand known as
wonderful cost separation, happens when a firm charges an alternate cost for each unit
consumed. The firm can charge the greatest conceivable cost for every unit which empowers the
firm to catch all suitable purchaser surplus for itself.

4.

D)
is ineffective because firms always have an incentive to break their agreements.

In a duopoly, two contending organizations control most of the market area for a specific item or
administration they give. For instance, Coca-Cola and Pepsi address a duopoly in light of the fact
that the two firms control practically the whole market for cola refreshments. Duopoly is an
exceptional instance of the hypothesis of oligopoly wherein there are just two merchants. Both
the merchants are totally autonomous and no understanding exists between them. Despite the fact
that they are free, an adjustment of the cost and result of one will influence the other, and may
set a chain of responses.

5.

D)
guaranteed price matching.

A PMG(Price Mach Guaranty) is basically a commitment by the retailer to discount the

distinction if the client, post-buy, finds a lower cost somewhere else. PMGs have been utilized in
both discount and customer markets by significant retailers around the world, like Walmart,
Tesco, and Best Buy to give some examples.
6.

B)
decreasing his competitors’ incentive to reduce price.

The economic and lawful concerns are that an oligopoly can obstruct new contestants, slow
advancement, and increment costs, all of which hurt customers. Firms in an oligopoly set costs,
whether by and large — in a cartel — or under the administration of one firm, as opposed to
taking costs from the market.

7.

C)
both firms will sell at the high price.

Surefire cost coordinating. The reasonable result of a surefire value coordinating or "meet-the-
opposition" That's what strategy is: the two firms will sell at the excessive cost.

8.

A)
the price a monopolist will pick.

At the point when firms are supposed to be cost takers, that's what it infers assuming a firm
raises its value, A. purchasers will go somewhere else. A monopolist can decide its benefit
expanding cost and amount by breaking down the negligible income and minor expenses of
delivering an additional unit. In the event that the minimal income surpasses the minor expense,
the firm ought to create the additional unit.

9.

B)
more likely when firms must commit to a single pricing strategy for the lifetime of the firm.

Price-fixing is the demonstration of setting costs, as opposed to allowing them still up in the air
by the unregulated economic powers. Another methodology is for firms to follow a perceived
cost pioneer; when the pioneer raises costs, the others will follow. Cost fixing is one of the most
well-known types of plot. Cost fixing happens when few organizations, known as an oligopoly,
overwhelm a particular inventory market. This little gathering of firms sell a similar item and
have come to a consent to fix the cost.

10.

D)
if one player underprices, then the other player drops the price so far that profits for both
firms are zero.
What makes a grim trigger strategy  "grim" is: If one player undervalues, then the other player
drops the cost so. far that benefits for the two firms are zero until the end of time. n the troubling
trigger system, a player participates in the principal round and in the resulting adjusts as long as
his rival doesn't desert from the understanding. When the player finds that the adversary has
double-crossed in the past game, he will then abandon for eternity.