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5 Written Questions

5 Matching Questions

  1. Prisoners' Dilemma
  2. Vertical Merger
  3. Godfather
  4. Balanced Oligopoly
  5. Joint Venture
  1. a A merger between firms who have a buyer/supplier relationship. Example: BFGoodrich merging with rubber plantations.
  2. 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.
  3. c An oligopoly in which the sales of the leading (top four) firms are relatively balanced among them.
  4. d The dominate firm in the oligopoly, whose pricing decisions are tacitly followed. The Godfather is the price leader.
  5. 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

  1. A merger between two firms in the same industry. Example: 2004 K-Mart merged with Sears
  2. Any combination of strategies in which each players' strategy is his or her best choice, given the other players' strategies.
  3. A merger of firms in unrelated industries. Example: If Purina Dow Chow merged with Pampers Diaper Company.
  4. A group of firms that collude to limit competition in a market by negotiating and accepting agreed-upon prices and market shares.
  5. A firm whose price decisions are tacitly accepted and followed by others in the industry.

5 True/False Questions

  1. Concentration RatioA measure of market power - the percentage of all sales that is accounted for by the four or eight largest firms in the market


  2. MergerA combination of two or more companies into one company.


  3. Kinked Demand CurveThe demand curve faced by an oligopolist. The curve is more elastic when the firm raises its price than when it lowers its price.


  4. Price DiscriminationVariations on one good so that a firm can increase market share.


  5. Brand MultiplicationVariations on one good so that a firm can increase market share.


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