5 Written Questions
5 Matching Questions
- Prisoners' Dilemma
- Vertical Merger
- Balanced Oligopoly
- Joint Venture
- a A merger between firms who have a buyer/supplier relationship. Example: BFGoodrich merging with rubber plantations.
- b A particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial to do so.
- c An oligopoly in which the sales of the leading (top four) firms are relatively balanced among them.
- d The dominate firm in the oligopoly, whose pricing decisions are tacitly followed. The Godfather is the price leader.
- e A business arrangement in which two or more firms undertake a specific economic activity together. Once the activity is over, the firms go their own way.
5 Multiple Choice Questions
- A merger between two firms in the same industry. Example: 2004 K-Mart merged with Sears
- Any combination of strategies in which each players' strategy is his or her best choice, given the other players' strategies.
- A merger of firms in unrelated industries. Example: If Purina Dow Chow merged with Pampers Diaper Company.
- A group of firms that collude to limit competition in a market by negotiating and accepting agreed-upon prices and market shares.
- A firm whose price decisions are tacitly accepted and followed by others in the industry.
5 True/False Questions
Concentration Ratio → A measure of market power - the percentage of all sales that is accounted for by the four or eight largest firms in the market
Merger → A combination of two or more companies into one company.
Kinked Demand Curve → The demand curve faced by an oligopolist. The curve is more elastic when the firm raises its price than when it lowers its price.
Price Discrimination → Variations on one good so that a firm can increase market share.
Brand Multiplication → Variations on one good so that a firm can increase market share.