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Business Competition
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Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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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. Maximize economic profit by producing the quantity at which MC=MR
Barrier to entry
Simultaneous decision games
Differentiated oligopoly
Maximizing profit in Oligopoly games
2. 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
Brand Multiplication
Monopolistic Competition
Sweezy oligopoly
Two-part pricing
3. 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
Payoff matrix
Implicit Collusion
Indefinitely repeated game
Subgame perfect equilibrium
4. The demand curve for a non-collusive oligopolist - which is based on the assumption that rivals will match a price decrease and will ignore a price increase
Kinked-demand curve
Dominant firm oligopoly
Simultaneous-move game
Duopoly
5. An establishment firm commits to setting price below the profit-maximizing level to prevent entry
Extensive-form game
Finding profit for oligopoly games
Repeated game
Limit pricing
6. 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
Prisoner's dilemma
Maximizing profit in Oligopoly games
Differentiated oligopoly
Disappearing invisible hand
7. 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
Mutual Interdependence
Dominant firm oligopoly
Primary Sources of Monopolistic Power
Credible threat
8. A table showing - for every possible combination of decisions players can make - the outcomes or "payoffs" for each of the players in each decision combination
Limit pricing
Brand Multiplication
Payoff table
Socially optimal price
9. 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)
Barrier to entry
Bargaining Power of Buyers
What is game?
Lerner index
10. An equilibrium in a game in which players cooperate to increase their mutual payoff
Limit price
Cooperative equilibrium
Product differentiation
Strategic behavior
11. Pricing strategy in which identical products are packaged together in order to enhance profits by forcing customers to make an all-or-none decision to purchase
Imperfect competition
Price Leadership
Payoff table
Block pricing
12. The maximum price that a buyer is willing to pay for a good - or the minimum price that a seller will accept
Mutual interdependence
Reservation Price
Payoff matrix
Cross-subsidy pricing
13. Single seller in an industry - Strong barriers to entry - Profit maximization - faces market demand and sets MR=MC - Unexploited gains from trade
Mixed (randomized) strategy
Product Differentiation
Monopoly (characteristics)
Empty threat
14. A firm whose price decisions are tacitly accepted and followed by others in the industry
Tacit collusion
Price Leadership
First-mover advantage
Tit-for-tat strategy
15. The derivative of total revenue
Marginal Revenue
Rothschild index
Price Leadership
Simultaneous consumption
16. Ranks industries according to how much social welfare would improve if the output in an industry were increased by a small amount
Third-Degree Price Discrimination
Finding profit for oligopoly games
Dansby-Willig performance index
Perfect Competition Short Run Supply
17. If production of a good requires a particular input - then control of that input can be a barrier to entry
Price discrimination
Homogenous oligopoly
Two-part pricing
Ownership of a Key Input
18. Rival who sets its output after the leader (Stackelberg's model)
Imperfect competition
Economies of scale
Follower
Non-cooperative equilibrium
19. The actions by persons - firms - or unions to gain special benefits from government at taxpayer's or someone else's expense
Brand Multiplication
Undifferentiated
Cross-subsidy pricing
Rent-seeking behavior
20. A representation of a game indicating the players - their possible strategies - and the payoffs resulting from alternative strategies
Dominant strategy equilibrium
Commodity bundling
Normal-form game
Prisoners' dilemma
21. The competition that domestic firms encounter from the products and services of foreign producers
Non-price competition
Import competition
Differentiated oligopoly
Double marginalization
22. The exclusive right to a product for a period of 20 years from the date the product is invented
Dominant strategy equilibrium
Product differentiation
Patent
Two-part pricing
23. Operates like the alleged Mafia. Region division of the market among the firms in the industry
Indefinitely repeated game
Price discrimination
Bargaining Power of Suppliers
Open Collusion
24. Price Sensitive
High Price Elasticity
Collusion
Minimum efficient scale (full capacity)
Mutual interdependence
25. Variations on one good so that a firm can increase market sharea
Rothschild index
Brand Multiplication
Cooperative equilibrium
Dansby-Willig performance index
26. Single firm is sole producer of a product for which there are no close substitutes
High Price Elasticity
Monopoly (characteristics)
Pure monopoly
Covert Collusion
27. Long-run marginal cost curve above long-run average cost
Perfect Competition Long Run Supply
Cross-subsidy pricing
Perfect Competitor Characteristics
Disappearing invisible hand
28. First firm to set its output (Stackelberg's model)
Prisoners' dilemma
Leader
Rent-seeking behavior
Perfect Competition Long Run Supply
29. In game theory - a decision rule that describes the actions a player will take at each decision point
Cournot oligopoly
Present Value (PV)
Nash equilibrium
Strategy
30. 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)
Four-firm concentration ratio
Subgame perfect equilibrium
Cheating
Examples of Monopolistic Competition
31. Competition based on factors that are not related to price - such as product quality - service and financing - business location - and reputation
Rent-seeking behavior
Nonprime competition
Cooperation
Normal-form game
32. The rules describe the setting of the game - the actions the players may take - and the consequences of those actions; -Advertising and R&D are also prisoners' dilemmas
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33. A market in which: (1) all have access to the same technology; (2) consumers respond quickly to price changes; (3) existing firms cannot respond quickly to entry by lowering their prices; and (4) there are no sunk costs
Kinked-demand curve
Perfect Competitor Characteristics
Contestable market
Secure strategy
34. An oligopoly in which the firms produce a standardized product
Payoff matrix
Socially optimal price
Natural Monopoly (local phone or electric company)
Homogenous oligopoly
35. Marginal cost curve above average variable cost - P* = SRMC
Third-degree price discrimination
Non-cooperative equilibrium
Perfect Competition Short Run Supply
Inter-industry competition
36. 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
Credible threat
Lerner index
Simultaneous consumption
Oligopoly
37. A merger of firms in unrelated industries. Example: If Purina Dow Chow merged with Pampers Diaper Company
Dominant strategy equilibrium
Present Value (PV)
Conglomerate Merger
Pure monopoly
38. Rules - strategies - payoffs - outcomes
What is game?
Cutthroat Competition
Perfect Competitor Characteristics
Inefficiency
39. A merger between firms who have a buyer/supplier relationship. Example: BF Goodrich merging with rubber plantations
Finding profit for oligopoly games
Perfect Competition Long Run Supply
Vertical Merger
Brand Multiplication
40. Sets the price at the highest level that is consistent with keeping the potential entrant out. -The strategy of reducing the price to deter entry
First-mover advantage
Price discrimination
Limit pricing
Interdependence
41. A pricing strategy in which profits gained from the sale of one product are used to subsidize sales of a related product
Cross-subsidy pricing
Market
Extensive-form game
Examples of Oligopoly
42. When firms limit production and raise prices in a way that raises each others' profits - even though they have not made any formal agreement
Prisoners' dilemma
Rothschild index
Common knowledge
Tacit collusion
43. 2 firms - simplest case in an oligopoly. Profits higher if limiting their production
Secure strategy
Duopoly
Market
Profit
44. A game that is played over and over again forever and in which players receive payoffs during each play of the game
Normal-form game
Profit
Undifferentiated
Indefinitely repeated game
45. When a manager makes a noncooperative decision
Present Value (PV)
Cheating
Pure monopoly
High Price Elasticity
46. Ignoring the effects of their actions on each others' profits
High Price Elasticity
Non-cooperative behavior
Rothschild index
Sequential game
47. Face competition from companies that currently are not in the market but might enter
Limit price
Dominant firm oligopoly
The Threat from Potential Entrants Firms
Tacit collusion
48. A combination of two or more companies into one company
Business strategy
Merger
Simultaneous-move game
Bargaining Power of Suppliers
49. A situation in which neither firm has incentive to change its output given the other firm's output
Subgame perfect equilibrium
Cooperative equilibrium
Cournot equilibrium
Payoff matrix
50. Actions taken by firms to plan for and react to competition from rival firms
Market Structure
Third-degree price discrimination
Strategic behavior
Brand Multiplication
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