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Business Competition
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Subject
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business-skills
Instructions:
Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. When an upstream divisions leverages "monopoly like" power to charge higher marginal cost to a downstream division - resulting in failure of the firm to optimize profits based on the wrong quantity decision at the firms level
Payoff matrix
Basis for Product Differentiation
What is game?
Double marginalization
2. When no one firm has a monopoly - but producers nonetheless realize that they can affect market prices. Firms compete but possess market power
Leader
Imperfect competition
Cournot oligopoly
Concentration Ratio
3. A simpler way to operationalize first-degree price discrimination
Bargaining Power of Buyers
Non-price competition
Two-part Tariff Method of Pricing
Interdependence
4. Produce differentiated products. Make a profit or take a lost in the short run - in the long run the firm will break even. (MOST number of firms.)
Primary Sources of Monopolistic Power
Rothschild index
Differentiated oligopoly
Monopolistic Characteristics:
5. A situation where one firm is able to provide a service at a lower cost than could several competing firms
Tacit collusion
Natural Monopoly (local phone or electric company)
Indefinitely repeated game
Two-part Tariff Method of Pricing
6. Game in which one player makes a move after observing the other player's move
Sequential-move game
Competitive market
Horizontal Merger/Integration
Vertical Merger
7. Competition based on factors that are not related to price - such as product quality - service and financing - business location - and reputation
Ownership of a Key Input
Vertical Merger
Basis for Product Differentiation
Nonprime competition
8. A strategy in which a firm advertises a price and a promise to match any lower prices offered by a competitor
Rent-seeking behavior
Block pricing
Monopolistic Competition
Price matching
9. Pricing strategy in which a firm intentionally varies its price in an attempt to "hide" price information from consumers and rivals
Non-rivalrous consumption
Indefinitely repeated game
Price Leadership
Randomized pricing
10. When firms make decisions that make every firm better off than in a noncooperative Nash equilibrium
Examples of Monopolistic Competition
Two-part Tariff Method of Pricing
Product Differentiation
Cooperation
11. The price that is low enough to deter entry
Limit price
Randomized pricing
Examples of Monopolistic Competition
Maximizing profit in Oligopoly games
12. In game theory - a statement of harmful intent easily dismissed by recipient because threat not considered believable
Product differentiation
Undifferentiated
Reservation Price
Empty threat
13. Long-run marginal cost curve above long-run average cost
Common knowledge
Perfect Competition Long Run Supply
Price discrimination
Lerner index
14. When a manager makes a noncooperative decision
Patent
Sequential game
Cheating
Trigger strategy
15. Each firm believes that if it raises its price - its competitors will not follow - but if it lowers its price all of its competitors will follow; -a model in which firms in an oligopoly match price cuts by other firms - but do not match price hike
Kinked demand curve model
Simultaneous decision games
Disappearing invisible hand
Dominant strategy equilibrium
16. Different units of a product are sold at different prices. Examples are buying in bulk - or - commodity-bundling
Second-Degree Price Discrimination
Monopolistic Characteristics:
Duopoly
First-mover advantage
17. The percentage of the total industry sales accounted for by the four largest firms in the industry. OUTPUT of 4 largest firms over TOTAL output in industry. C4=(S1+...+S4)/St or (w1+...+w4)
Dominant strategy equilibrium
Simultaneous consumption
Tit-for-tat strategy
Four-firm concentration ratio
18. A firm whose price decisions are tacitly accepted and followed by others in the industry
Price Leadership
Ownership of a Key Input
Fair return price
Vertical Merger
19. Pricing strategy in which higher prices are charged during peak hours than during off-peak hours
Natural Monopoly (local phone or electric company)
Peak-load pricing
Sequential game
Rothschild index
20. Industry in which (1) few firms serving many customers; (2) firms produce identical products t constant marginal cost; (3) firms compete in price and react optimally to competitor's prices; (4) consumers have perfect information and here are no trans
Collusion
Equilibrium
Bertrand oligopoly
Nonprime competition
21. A merger between two firms in the same industry. Example: 2004 K-Mart merged with Sears
Double marginalization
Horizontal Merger/Integration
Herfindahl-Hirschman index (HHI)
Third-degree price discrimination
22. Revenue-Costs
Profit
Commodity bundling
Natural Monopoly (local phone or electric company)
Barrier to entry
23. Identical or substitutable
Third-Degree Price Discrimination
Open Collusion
Undifferentiated
Monopoly (characteristics)
24. The situation when a firm's long-run average costs fall as it increases output
What is game?
Economies of scale
Minimum efficient scale (full capacity)
Stackelberg oligopoly
25. When something can be consumed without reducing the benefits available for subsequent consumption; can be consumed without supporting rivalry between consumers
Non-rivalrous consumption
Brand Multiplication
Cooperative equilibrium
Dansby-Willig performance index
26. If many firms can supply an input and the input is not specialized - the suppliers are unlikely to have the bargaining power to limit a firm's profits
Bargaining Power of Suppliers
Monopolistic Competition
Monopoly (characteristics)
Mutual interdependence
27. Maximize economic profit by producing the quantity at which MC=MR
Maximizing profit in Oligopoly games
Mutual interdependence
Common knowledge
Differentiated oligopoly
28. A condition describing a set of strategies in which no player can improve their payoff by unilaterally changing their own strategy given the other player's strategy
Block pricing
Reservation Price
Nash equilibrium
Limit pricing
29. The actions by persons - firms - or unions to gain special benefits from government at taxpayer's or someone else's expense
Tacit collusion
Open Collusion
Rent-seeking behavior
Cooperation
30. When each firm has an incentive to cheat - but both are worse off if both cheat -- illustrates why cooperation is difficult to maintain even when it is mutually beneficial to do so
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31. Industry in which (1) there are few firms serving many customers; (2) firms produce either differentiated or homogenous products; (3) a single (leader) firm chooses an output quantity before their rivals select their outputs; (4) all other (follower)
Follower
Stackelberg oligopoly
Merger
Import competition
32. A measure of market power - the percentage of all sales that is accounted for by the four or eight largest firms in the market
What is game?
Profit
Maximizing profit in Oligopoly games
Concentration Ratio
33. Variations on one good so that a firm can increase market sharea
Bargaining Power of Buyers
Examples of Oligopoly
Prisoner's dilemma
Brand Multiplication
34. A merger between firms who have a buyer/supplier relationship. Example: BF Goodrich merging with rubber plantations
Perfect Competitor Making a Profit
Vertical Merger
Common knowledge
Leader
35. Face competition from companies that currently are not in the market but might enter
Brand Multiplication
Market
Present Value (PV)
The Threat from Potential Entrants Firms
36. An oligopoly in which the sales of the leading (top four) firms are distributed unevenly among them
Secure strategy
Prisoner's dilemma
Non-price competition
Unbalanced Oligopoly
37. Rival who sets its output after the leader (Stackelberg's model)
Follower
One-shot game
Leader
Limit pricing
38. The derivative of total revenue
Payoff
Inefficiency
Marginal Revenue
Vertical Merger
39. Specific assets - Economies of scale - Excess capacity - Reputation effects
Nonprime competition
Perfect Competition Barriers to Entry
Mutual Interdependence
Primary Sources of Monopolistic Power
40. A condition describing a set of strategies that constitutes a Nash equilibrium and allows no player to improve their own payoff at any stage of the game by changing strategies
Examples of Oligopoly
Merger
Sequential-move game
Subgame perfect equilibrium
41. Multiple firms produce similar products - Firms face downward sloping demand curves - Profit maximization occurs where MC=MR - With free entry and exit - firms compete away economic profits
Monopolistic Competition
Primary Sources of Monopolistic Power
Duopoly
Product differentiation
42. Operates like the alleged Mafia. Region division of the market among the firms in the industry
Open Collusion
Examples of Monopolistic Competition
Monopolistic Competition
Bertrand oligopoly
43. Where a firm can charge different groups of consumers different prices for the same product. Example: student or senior discounts
Third-degree price discrimination
Natural Monopoly (local phone or electric company)
Dominant strategy
Sweezy oligopoly
44. An oligopoly in which the firms produce a standardized product
Limit price
Bargaining Power of Suppliers
Open Collusion
Homogenous oligopoly
45. Physical differences - Convenience - Ambience - Reputations - Appeals to vanity - Unconscious fears and desires - Snob appeal - Customized products
Basis for Product Differentiation
Non-rivalrous consumption
Transfer pricing
Normal-form game
46. Actions taken by firms to plan for and react to competition from rival firms
Strategic behavior
Credible threat
Profit
Maximizing profit in Oligopoly games
47. Single seller in an industry - Strong barriers to entry - Profit maximization - faces market demand and sets MR=MC - Unexploited gains from trade
Monopoly (characteristics)
Price discrimination
Cutthroat Competition
Bargaining Power of Buyers
48. When the decisions of two or more firms significantly affect each others' profits
Horizontal Merger/Integration
Interdependence
Product differentiation
Mixed (randomized) strategy
49. 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
Joint Venture
Dominant strategy equilibrium
Sequential-move game
Open Collusion
50. A few firms produce most market output - Products may or may not be differentiated - Effective entry barriers protect firm profitability - Firm interdependence requires strategic thinking
Open Collusion
Perfect Competition Barriers to Entry
Oligopoly
Market Structure
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