Intro Worksheet Ch. 16 Oligopoly Introduction Qz form A Oligopoly: Jack and Jill alternative questions Prisoners Dilemma and Dominant Strategy notes Practice 1 Study Guide and Self Test Ch 16 FRQ – turned in 2007 AP FRQ Notes Packet (Kinked Demand Curve) Kinked Demand Curve Quiz Ch 16 Public Policy Towards Oligopoly 2009 and 2010 AP FRQ

Jack and Jill Alternative Questions 1. 3 Firms in cartel. Market P, Q, Profit? Market P = $60, Q = 60, Profit = $3600 P, Q, and Profit for each firm? Firm A : P = $60, Q = 20, Profit = $1200 Firm B: P = $60, Q = 20, Profit = $1200 Firm C: P = $60, Q = 20, Profit = $1200 Does Any Firm Have the incentive to change?

QuantityPriceTotal Rev and Profit assume Firm A breaks the agreement and produces 10 more units. What is the market P, Q, and Profit? What is the P, Q, and Profit for each firm? Market P = $50, Q = 70, Profit = $3500 Firm A: P = $50, Q = 30, Profit = $1500 Firm B: P = $50, Q = 20, Profit = $1000 Firm C: P = $50, Q = 20, Profit = $1000 Does any firm have the incentive to change?

1.After firm A produced more, now assume Firm B produces 10 more units. What is the market P, Q, and Profit? Market P = $40, Q = 80, Profit = $3200 What is the P, Q, and Profit for each firm? Firm A: P = $40, Q = 30, Profit = $1200 Firm B: P = $40, Q = 30, Profit = $1200 Firm C: P = $40, Q = 20, Profit = $800 After Firm B brought 10 more, does any firm have the incentive to change

After firm B produced more, now assume Firm C produces 10 more units. What is the market P, Q, and Profit? Market P = $30, Q = 90, Profit = $2700 What is the P, Q, and Profit for each firm? Firm A: P = $30, Q = 30, Profit = $900 Firm B: P = $30, Q = 30, Profit = $900 Firm C: P = $30, Q = 30, Profit = $900 After Firm C brought 10 more, does any firm have the incentive to break the cartel agreement. No……. = Nash Equilibrium COMPARE OUTCOMES : BETTER FOR SOCIETY? BETTER FOR FIRMS?

Assume there are only two firms in this oligopoly. They face a $300 fixed cost per year. They have reached a cartel agreement. What is the market P, Q, and Profit? What is the P, Q, and Profit for each firm? Market P = $60, Q = 60, Profit = $3000 {TR(3600) – TC (600)} Firm A: P = $60, Q = 30, Profit = $1500 {TR 1800 – TC 300} Firm B: P = $60, Q = 30, Profit = $1500 {TR 1800 – TC 300}