7. Question : In an oligopoly market

Student Answer:    the pricing decisions of all other firms have no effect on an individual firm.
individual firms pay no attention to the behavior of other firms.
advertising of one firm has no effect on all other firms.

one firm’s pricing decision affects all the other firms.


Points Received: 1 of 1


8. Question : Figure 13-4
Rainbow Writer (RW) is a small online company selling a highly rated software package for printing color labels directly onto CDs. The firm currently earns a profit of $2 million per year selling its package exclusively on its website. Odeon, the producer of the most popular software package for editing and burning CDs and DVDs, has expressed interest in bundling Rainbow Writer’s product into its own package. Odeon expects that bundling would further boost its sales and allow it to sell the new bundled product at a higher price, thus raising its profits beyond its current profit of $12 million. Figure 13-4 shows the decision tree for the Rainbow Writer-Odeon bargaining game.

Refer to Figure 13-4. In a real world situation involving Rainbow Writer and Odeon, what scenario below might permit Rainbow Writer to rationally refuse an offer from Odeon of $40 per copy of the software package?

Student Answer:    Odeon is also negotiating with Swift Colors, Rainbow Writer’s chief rival.
Odeon’s competitors are also interested in bundling Rainbow Writer’s software.
Odeon hires a software developer to begin developing its own proprietary color labeling software.
Odeon is considering new distribution outlets for its products.

Points Received: 1 of 1


9. Question : Oligopolies exist and do not attract new rivals because

Student Answer:    of competition.

of barriers to entry.

the firms keep profits and prices so low that no rivals are attracted.
there can be no product differentiation.


Points Received: 1 of 1


10. Question : An oligopoly firm is similar to a monopolistically competitive firm in that

Student Answer:    both firms face the prisoners’ dilemma.

both operate in a market in which there are entry barriers.
both firms have market power.

both firms are in industries characterized by an interdependent firm.

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