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Test your basic knowledge |
Business Competition
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Study First
Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
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. A measure of the difference between price and marginal cost as a fraction of the product's price. L=(P-MC)/P - refactoring gives: P=MC(1/(1-L)) - which gives us the "1/(1-L)" markup factor
Lerner index
Common knowledge
Undifferentiated
Transfer pricing
2. Price Sensitive
Minimum efficient scale (full capacity)
High Price Elasticity
Bertrand oligopoly
Present Value (PV)
3. The competition for sales between the products of one industry and the products of another industry
Inter-industry competition
Simultaneous decision games
Pure monopoly
Dominant firm oligopoly
4. A table that shows the payoffs that each firm earns from every combination of strategies by the firms
Natural Monopoly (local phone or electric company)
Payoff matrix
Randomized pricing
Dominant strategy equilibrium
5. Physical differences - Convenience - Ambience - Reputations - Appeals to vanity - Unconscious fears and desires - Snob appeal - Customized products
Price war
Basis for Product Differentiation
Non-rivalrous consumption
High Price Elasticity
6. (1) Economies of Scale; (2) Economies of Scope; (3) Cost Complementarity; and (4)Patents & Other Legal Barriers
Primary Sources of Monopolistic Power
Marginal Revenue
Simultaneous decision games
Subgame perfect equilibrium
7. 1/(1+i)n
Simultaneous-move game
Commodity bundling
Two-part Tariff Method of Pricing
Present Value (PV)
8. In game theory - a statement of harmful intent by one party that the other party views as believable-- "if you do this - we will do that"
Credible threat
Brand Multiplication
Economies of scale
Stackelberg oligopoly
9. A strategy that guarantees the highest payoff given the worst possible scenario
Maximizing profit in Oligopoly games
Unbalanced Oligopoly
Secure strategy
Horizontal Merger/Integration
10. 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
Strategy
Indefinitely repeated game
What is game?
Oligopoly
11. When firms make decisions that make every firm better off than in a noncooperative Nash equilibrium
Tit-for-tat strategy
Fair return price
Two-part pricing
Cooperation
12. A strategy or action that always provides the best outcome no matter what decisions rivals make
Kinked demand curve model
Oligopoly
Price discrimination
Dominant strategy
13. Pricing strategy in which a firm intentionally varies its price in an attempt to "hide" price information from consumers and rivals
Competitive market
Randomized pricing
Monopolistic Competition
Indefinitely repeated game
14. Toothpaste - shampoo - restaurants - banks
Implicit Collusion
Limit pricing
Examples of Monopolistic Competition
Tacit collusion
15. Steel - autos - colas - airlines
Examples of Oligopoly
Sequential game
Leader
Dominant strategy equilibrium
16. Anything that keeps new firms from entering an industry in which firms are earning economic profits (e.g. Ownership of a Key Input - Capital - Patents - Economies of scale)
Stackelberg oligopoly
Barrier to entry
Kinked demand curve model
Imperfect competition
17. The price that is low enough to deter entry
Bargaining Power of Suppliers
Limit price
Ownership of a Key Input
Sequential-move game
18. A representation of a game indicating the players - their possible strategies - and the payoffs resulting from alternative strategies
Kinked-demand curve
Profit
Collusion
Normal-form game
19. A merger between firms who have a buyer/supplier relationship. Example: BF Goodrich merging with rubber plantations
Rent-seeking behavior
Vertical Merger
Mutual interdependence
Socially optimal price
20. The players end up worse off than they would if they were able to cooperate; -the pursuit of self-interest does not promote the social interest in these games
Disappearing invisible hand
Prisoner's dilemma
Examples of Oligopoly
Second-Degree Price Discrimination
21. A situation in which competing firms must make their individual decisions without knowing the decisions of their rivals
Non-cooperative equilibrium
Market Structure
Profit
Simultaneous decision games
22. An industry where (1) there are few firms serving many customers; (2) firms produce differentiated products; (3) each firm believes rivals will respond to price reductions but will not follow price increases; and (4) barriers to entry exist
Payoff matrix
Mutual Interdependence
Perfect Competition Short Run Supply
Sweezy oligopoly
23. 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)
Strategic behavior
Maximizing profit in Oligopoly games
Perfect Competitor Characteristics
Four-firm concentration ratio
24. Actions taken by firms to plan for and react to competition from rival firms
Imperfect competition
Mutual interdependence
Common knowledge
Strategic behavior
25. A merger between two firms in the same industry. Example: 2004 K-Mart merged with Sears
Horizontal Merger/Integration
Inefficiency
Credible threat
Dansby-Willig performance index
26. Pricing strategy in which higher prices are charged during peak hours than during off-peak hours
Four-firm concentration ratio
Transfer pricing
Peak-load pricing
Minimum efficient scale (full capacity)
27. The practice of bundling several different products together and selling them at a single "bundle" price
Sequential-move game
Simultaneous decision games
Third-degree price discrimination
Commodity bundling
28. A measure of market power - the percentage of all sales that is accounted for by the four or eight largest firms in the market
Cutthroat Competition
Concentration Ratio
Normal-form game
Disappearing invisible hand
29. 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
Cooperative equilibrium
Bargaining Power of Suppliers
Mutual interdependence
Non-price competition
30. The actions by persons - firms - or unions to gain special benefits from government at taxpayer's or someone else's expense
Prisoners' dilemma
Rent-seeking behavior
Product Differentiation
Socially optimal price
31. Single seller in an industry - Strong barriers to entry - Profit maximization - faces market demand and sets MR=MC - Unexploited gains from trade
Horizontal Merger/Integration
Monopoly (characteristics)
Vertical Merger
Non-rivalrous consumption
32. Rules - strategies - payoffs - outcomes
Product Differentiation
Price Leadership
Fair return price
What is game?
33. When firms limit production and raise prices in a way that raises each others' profits - even though they have not made any formal agreement
Subgame perfect equilibrium
What is game?
Sweezy oligopoly
Tacit collusion
34. Intense competition in which competitors cut retail prices to gain business--oligopolistic competition
Price war
Perfect Competition (characteristics)
Implicit Collusion
Strategy
35. The practice of charging different prices to consumers for the same good or service
Common knowledge
Price discrimination
Dominant strategy equilibrium
Prisoner's dilemma
36. Price of a product that enables its producer to obtain a normal profit & that is equal to the ATC of producing it
Cheating
Fair return price
Indefinitely repeated game
Dominant strategy
37. An equilibrium in a game in which players cooperate to increase their mutual payoff
First-mover advantage
Cournot equilibrium
Cooperative equilibrium
Tit-for-tat strategy
38. The derivative of total revenue
Product differentiation
Marginal Revenue
Homogenous oligopoly
Simultaneous consumption
39. All firms and individuals willing and able to buy or sell a particular product
Third-degree price discrimination
Market
Tacit collusion
Patent
40. Long-run marginal cost curve above long-run average cost
Simultaneous decision games
Sequential-move game
Perfect Competition Long Run Supply
Credible threat
41. 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
Implicit Collusion
Mutual interdependence
Non-cooperative equilibrium
Double marginalization
42. A representation of a game that summarizes the players - the information available to them at each stage - the strategies available to them - the sequence of moves - and the payoffs resulting from alternative strategies
Vertical Merger
Sweezy oligopoly
Extensive-form game
Cheating
43. Demand line is above ATC curve
Equilibrium
Tacit collusion
Perfect Competitor Making a Profit
Competitive market
44. A situation in which neither firm has incentive to change its output given the other firm's output
Concentration Ratio
Maximizing profit in Oligopoly games
Contestable market
Cournot equilibrium
45. A firm whose price decisions are tacitly accepted and followed by others in the industry
Horizontal Merger/Integration
Nonprime competition
Stackelberg oligopoly
Price Leadership
46. In game theory - game where parties make their moves in turn - one party making the first move followed by the other
Stackelberg oligopoly
Sequential game
Follower
Limit pricing
47. An oligopoly in which the firms produce a differentiated product
Market Structure
Transfer pricing
Product Differentiation
Differentiated oligopoly
48. Different units of a product are sold at different prices. Examples are buying in bulk - or - commodity-bundling
Differentiated oligopoly
Price discrimination
Disappearing invisible hand
Second-Degree Price Discrimination
49. Pricing strategy in which a firm optimally sets the internal price at which an upstream division wells an input to a downstream division
Transfer pricing
Cournot oligopoly
Limit pricing
First-Degree Price Discrimination (Perfect)
50. Marginal cost curve above average variable cost - P* = SRMC
Market Structure
Payoff matrix
Perfect Competition Short Run Supply
Limit price