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5 Written questions

5 Matching questions

  1. Vertical Merger
  2. Kinked Demand Curve
  3. Price Leadership
  4. Godfather
  5. Joint Venture
  1. a A merger between firms who have a buyer/supplier relationship. Example: BFGoodrich merging with rubber plantations.
  2. b 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.
  3. c The demand curve faced by an oligopolist. The curve is more elastic when the firm raises its price than when it lowers its price.
  4. d A firm whose price decisions are tacitly accepted and followed by others in the industry.
  5. e The dominate firm in the oligopoly, whose pricing decisions are tacitly followed. The Godfather is the price leader.

5 Multiple choice questions

  1. A merger of firms in unrelated industries. Example: If Purina Dow Chow merged with Pampers Diaper Company.
  2. A merger between two firms in the same industry. Example: 2004 K-Mart merged with Sears
  3. The situation that exists when two or more groups need each other and must depend on each other to accomplish a goal that is important to each of them
  4. Variations on one good so that a firm can increase market share.
  5. The theory that studies decision making in situations in which one player anticipates the reactions of other players to its own actions. Firms are mutually interdendent.

5 True/False questions

  1. Tit-for-Tat StrategyA pricing strategy in game theory in which firms continue to match each others' pricing strategy.


  2. Unbalanced OligopolyAn oligopoly in which the sales of the leading (top four) firms are relatively balanced among them.


  3. Price DiscriminationOffering specific goods or services at different prices to different segments of the market. Example: First class versus business class on airlines.


  4. Nash EquilibriumAny combination of strategies in which each players' strategy is his or her best choice, given the other players' strategies.


  5. Prisoners' DilemmaA firm whose price decisions are tacitly accepted and followed by others in the industry.


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