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Please Read Chapter 10 and Answer the Following Questions:

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Please read chapter 10 and answer the following questions:
1. (Varieties of Oligopolies) do the firms in an oligopoly act independently or interdependently? Explain your answer.

2. (Price Leadership) why might a price–leadership model of oligopoly not be an effective means of collusion in an oligopoly? * Price leadership practices violate US anti-trust laws. * The more differentiated the product is, the less effective price leadership is as a means of collusion. * There is no guarantee firms will follow the leader forcing the leading firm to reduce prices. * Cheating may occur. * A new entry can destabilize the price leader's position…

-If a price leader in an oligopolistic market sets price and output in order to maximize profits and if that setting is high; then this will encourage the entry of new firms into the market. And that will result in the loss of profits over the long run.

3. (Collusion and Cartels) why would each of the following induce some members of OPEC to cheat on their cartel agreement?

a. Newly joined cartel members are less–developed countries. * By producing more output than it has agreed to produce, the new member country can increase its share of the cartel's profits.

b. The number of cartel members doubles from 11 to 22. * The greater the number of firms, the more probable it is that one of those firms is a maverick firm; that is, a firm known for pursuing aggressive and independent pricing strategy.

c. International debts of some members grow…

d. Expectations grow that some members will cheat. * In this case, cheating would mean that a country produces more barrels of oil each day than its assigned amount. In order to grab a larger share of the profit.
4. (Game Theory) While grading a final exam, an economics professor discovers that two students have virtually identical

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