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Strategic Management and Competitive Advantage, 6e (Barney)
Chapter 7 Collusion
2) The ability of a group of firms to work together to reduce competition in their market or
industry is called ________.
A) collaboration
B) fragmentation
C) collusion
D) differentiation
Answer: C
Diff: 2 Page Ref: 179
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
3) General Electric's decision to focus on large electric generation turbines and Westinghouse's
decision to focus on small electric generation turbines is an example of ________.
A) differentiation
B) collaboration
C) segmentation
D) collusion
Answer: D
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
1
Copyright © 2019 Pearson Education, Inc.
4) Which of the following is NOT an instance of collusion?.
A) General Motors and Ford Motor Company forming a strategic alliance to make electric cars.
B) Members of OPEC agreeing to reduce oil shipments in 1973.
C) Coca-Cola's decision to focus on the Western European market and Pepsi's decision to focus
on the Russian market.
D) General Electric's decision to focus on large electric generation turbines and Westinghouse's
decision to focus on small electric generation turbines.
Answer: A
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Application of Knowledge
5) Collusion can take one of two forms, ________ collusion or ________ collusion.
A) strategic; non-strategic
B) explicit; tacit
C) market; product
D) intra-industry; inter-industry
Answer: B
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
6) ________ collusion exists when firms in an industry directly negotiate agreements about how
to reduce competition.
A) Explicit
B) Strategic
C) Intra-industry
D) Tacit
Answer: A
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
7) ________ collusion exists when firms cooperate in reducing competition, but engage in no
face to face negotiations to do so.
A) Explicit
B) Strategic
C) Intra-industry
D) Tacit
Answer: D
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
2
Copyright © 2019 Pearson Education, Inc.
8) ________ collusion can be legal.
A) Tacit
B) Explicit
C) Strategic
D) Any
Answer: A
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
10) Firms with homogeneous resources and capabilities that cooperate to reduce competition
below a perfect competition level can generate economic profits, but in doing so reduce social
welfare in a phenomenon called ________ loss.
A) abnormal
B) ethical
C) collusion
D) dead weight
Answer: D
Diff: 2 Page Ref: 181
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Ethical Understanding and Reasoning
3
Copyright © 2019 Pearson Education, Inc.
Gamma Food Products competes in the "center-of-the-aisle" packaged foods business. Ever since
its founding and membership in the industry, the company has focused on gaining market share.
In 2017, it had, by far, the largest market share in the industry and used this advantage to create
order and discipline in the industry, particularly in terms of prices. Starting in late 2016, Gamma
Food Products' VP of Marketing, Polly Kundig noticed the heads of Gamma's four largest
competitors were meeting often surreptitiously, particularly at trade shows. Parallelly, Kundig
also noticed that the four firms were pricing their products at around the same level and distinct
from the prices of others, including Gamma. In addition, when one of the four made a move in
pricing or capacity planning, the others made quick responses.
11) The frequent surreptitious meetings of Gamma Food Products' four largest competitors,
observed by Polly Kundig, suggests that they are engaged in ________.
A) strategic planning
B) explicit collusion
C) industry promotion
D) market expansion
Answer: B
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Application of Knowledge
12) The economic profits generated by the strategies of cost leadership, product differentiation,
and flexibility can be thought of as efficiency profits.
Answer: TRUE
Diff: 1 Page Ref: 179
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
13) Collusion is the ability of a group of firms to work together to increase competition in their
market or industry.
Answer: FALSE
Diff: 1 Page Ref: 179
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
4
Copyright © 2019 Pearson Education, Inc.
15) Coca-Cola's decision to focus on the Western European market and Pepsi's decision to focus
on the Russian market is an example of collusion.
Answer: TRUE
Diff: 1 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
16) Explicit collusion exists when firms in an industry directly negotiate agreements about how
to reduce competition.
Answer: TRUE
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
18) Tacit collusion exists when firms cooperate in reducing competition, but engage in no face to
face negotiations to do so.
Answer: TRUE
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
20) Tacit collusion requires firms to signal their willingness to cooperate to reduce competition
directly.
Answer: FALSE
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
5
Copyright © 2019 Pearson Education, Inc.
21) Whether explicit or implicit, firms that engage in collusion face a number of fundamental
ethical challenges.
Answer: TRUE
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Ethical Understanding and Reasoning
22) It is well established in economic theory that imperfectly competitive markets are consistent
with social welfare.
Answer: FALSE
Diff: 2 Page Ref: 181
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
24) What are the two types of collusion and how are they different?
Answer: Collusion can take one of two forms, explicit collusion or tacit collusion. Explicit
collusion exists when firms in an industry directly negotiate agreements about how to reduce
competition. When members of OPEC met and agreed to reduce oil shipments in 1973, they
were engaged in explicit collusion. Explicit collusion is illegal in most developed countries.
Tacit collusion exists when firms cooperate in reducing competition, but engage in no face to
face negotiations to do so. Tacit collusion can be legal. However, firms that engage in any kind
of collusion face fundamental ethical challenges.
Diff: 2 Page Ref: 180
Learning Obj.: 7.1: Define Explicit and Tacit Collusion and Explain Why Collusion is
Typically Inconsistent with Social Welfare in an Economy.
AACSB: Analytical Thinking
6
Copyright © 2019 Pearson Education, Inc.
25) Which of the following is NOT a way by which firms can collude to reduce the threat of new
competitors?
A) Working together to increase the barriers to entry.
B) Developing common technology standards that act as barriers to entry.
C) Moving away from using product differentiation as a barrier to entry.
D) Joint lobbying to increase the cost of entry.
Answer: C
Diff: 2 Page Ref: 182
Learning Obj.: 7.2: Describe How Collusion can Create Economic Profits.
AACSB: Analytical Thinking
26) Which of the following is NOT a way to create economic profits via collusion?
A) Colluding to increase the bargaining power of buyers.
B) Colluding to reduce the threat of new competitors.
C) Colluding to reduce the threat of current competitors.
D) Colluding to reduce supplier leverage threats.
Answer: A
Diff: 2 Page Ref: 182
Learning Obj.: 7.2: Describe How Collusion can Create Economic Profits.
AACSB: Analytical Thinking
27) Firms can collude to reduce the threats from new competitors by working together to
decrease the barriers to entry into an industry.
Answer: FALSE
Diff: 3 Page Ref: 182
Learning Obj.: 7.2: Describe How Collusion can Create Economic Profits.
AACSB: Analytical Thinking
28) Firms can develop competing technological standards that make it very difficult for new
firms to enter an industry.
Answer: FALSE
Diff: 2 Page Ref: 182
Learning Obj.: 7.2: Describe How Collusion can Create Economic Profits.
AACSB: Analytical Thinking
29) Collusion with other firms in an industry involves increasing competition among those firms.
Answer: FALSE
Diff: 2 Page Ref: 183
Learning Obj.: 7.2: Describe How Collusion can Create Economic Profits.
AACSB: Analytical Thinking
30) Joint lobbying efforts by industry incumbents can increase the cost of entry into an industry.
Answer: TRUE
Diff: 2 Page Ref: 183
Learning Obj.: 7.2: Describe How Collusion can Create Economic Profits.
AACSB: Analytical Thinking
7
Copyright © 2019 Pearson Education, Inc.
31) Members of OPEC discovered the limits of their ability to collude in reducing the volume of
oil they were willing to sell when the increased price of crude oil led a variety of companies to
explore alternative sources of energy and consumers to conserve.
Answer: TRUE
Diff: 2 Page Ref: 184
Learning Obj.: 7.2: Describe How Collusion can Create Economic Profits.
AACSB: Analytical Thinking
32) The reason that collusion is a difficult strategy to maintain over time is that while parties to
these cooperative agreements often have strong incentives to cooperate, they also have strong
incentives to ________ those cooperative agreements.
A) profit from
B) maintain
C) go along with
D) cheat on
Answer: D
Diff: 2 Page Ref: 184
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
33) According to the ________ cheating model, assuming little or no product differentiation
among a small number of firms, if one firm decides to cheat on a collusive agreement by
reducing its prices, others will as well and, in the long run, firms in this industry will earn no
economic profits.
A) Cournot
B) Edgeworth
C) Stackelberg
D) Bertrand
Answer: D
Diff: 3 Page Ref: 185
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
8
Copyright © 2019 Pearson Education, Inc.
34) Which of the following models is NOT an important form of cheating in collusive
agreements?
A) Schumpeter
B) Bertrand
C) Cournot
D) Edgeworth
Answer: A
Diff: 1 Page Ref: 185
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
36) Generally, long-run profits for firms that cheat on purely collusive agreements fall ________
the perfect competition, zero-economic-profit solution and the perfect competition, shared-
monopoly-profit solution.
A) clearly outside of
B) at one side of
C) somewhere outside of
D) somewhere between
Answer: D
Diff: 3 Page Ref: 186
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
9
Copyright © 2019 Pearson Education, Inc.
37) Instead of communicating directly, ________ colluding firms send and interpret signals of
intent to co-operate (or intent not to co-operate) sent by potential collusion partners.
A) tacitly
B) explicitly
C) strategically
D) operationally
Answer: A
Diff: 3 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
38) Firms that consciously make price and output decisions in order to reduce competition may
be engaging in what the courts call ________.
A) conspicuous consumption
B) conscious parallelism
C) predatory action
D) coalitionary action
Answer: B
Diff: 2 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
39) In general, firms can send one of two signals to collusion partners who may cheat on their
cooperative agreements: a ________ signal or a ________ signal.
A) explicit; implicit
B) explicit; tacit
C) visual; verbal
D) tough; soft
Answer: D
Diff: 2 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
10
Copyright © 2019 Pearson Education, Inc.
40) Omega, Inc. signals that if parties cheat on collusive agreements, it will decrease prices more
or increase output more than would have otherwise been the case. Omega, Inc. is sending a(n)
________ signal.
A) explicit
B) tacit
C) tough
D) soft
Answer: C
Diff: 3 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
41) Omega, Inc. signals that if parties cheat on collusive agreements, it will decrease its prices
less or increase its output less than would have otherwise been the case. Omega, Inc. is sending
a(n) ________ signal.
A) explicit
B) tacit
C) tough
D) soft
Answer: D
Diff: 2 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
42) Investing in a new production process that reduces a firm's marginal cost of production is an
example of a ________ signal.
A) strategic
B) functional
C) soft
D) tough
Answer: D
Diff: 2 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
11
Copyright © 2019 Pearson Education, Inc.
43) Positioning a firm's product so that it does not compete directly with the products of a
colluding firm is an example of a ________ signal.
A) soft
B) tough
C) strategic
D) functional
Answer: A
Diff: 2 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
44) When price is likely to be the major basis of competition in an industry, firms should not
make investments that send a(n) ________ signal.
A) soft
B) tough
C) explicit
D) tacit
Answer: B
Diff: 2 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
45) Ben & Jerry's decision to not enter the frozen yogurt business is an example of the
________.
A) "puppy-dog-play"
B) "fat-cat effect"
C) "top-dog strategy"
D) "lean-and-hungry look"
Answer: A
Diff: 1 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
12
Copyright © 2019 Pearson Education, Inc.
46) When price is likely to be the basis of competition in an industry, firms should invest
proactively in ________ signals.
A) soft
B) tough
C) tacit
D) explicit
Answer: A
Diff: 2 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
47) In an industry where the primary basis of competition is quantity, firms may invest heavily
in, say, manufacturing capacity, even if those investments do not generate positive economic
profits directly. Sending this kind of a signal is called ________.
A) "puppy-dog-play"
B) "fat-cat effect"
C) "top-dog strategy"
D) "lean-and-hungry look"
Answer: C
Diff: 2 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
48) Hewlett-Packard's (HP) decision to spin off its electronic instruments business into a separate
company is an example of a firm that has adopted a ________.
A) "puppy-dog-play"
B) "fat-cat effect"
C) "top-dog strategy"
D) "lean-and-hungry look"
Answer: D
Diff: 2 Page Ref: 192
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
13
Copyright © 2019 Pearson Education, Inc.
49) Which of the following is NOT a ploy used in signaling?
A) "puppy-dog-play"
B) "lap-dog effect"
C) "top-dog strategy"
D) "lean-and-hungry look"
Answer: B
Diff: 2 Page Ref: 192
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
50) Which of the following is NOT an industry attribute that facilitates the development and
maintenance of tacit collusion?
A) Small number of firms
B) Product homogeneity
C) Cost homogeneity
D) Exit barriers
Answer: D
Diff: 2 Page Ref: 192
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
51) Tacit collusion is more likely to be successful if there ________ firms in an industry.
A) are a large number of
B) is a small number of
C) are unequally sized
D) are successful
Answer: B
Diff: 2 Page Ref: 192
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
14
Copyright © 2019 Pearson Education, Inc.
52) Tacit collusion is more likely when firms produce and sell ________ products or services.
A) similar
B) dissimilar
C) many
D) diverse
Answer: A
Diff: 2 Page Ref: 194
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
53) ________ of economic costs enhances the opportunities to implement tacit collusion.
A) Heterogeneity
B) Transparency
C) Homogeneity
D) Opacity
Answer: C
Diff: 2 Page Ref: 194
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
54) A ________ is a firm that sets "acceptable" industry prices or acceptable "profit margins" in
an industry.
A) price leader
B) differentiator
C) cost leader
D) flag bearer
Answer: A
Diff: 2 Page Ref: 194
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
15
Copyright © 2019 Pearson Education, Inc.
55) Existence of industry ________ creates opportunities for tacit collusion.
A) flag bearers
B) price leaders
C) differentiators
D) pioneers
Answer: B
Diff: 3 Page Ref: 194
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
57) Industry ________ structure can create opportunities for tacit collusion.
A) physical
B) cost
C) competitive
D) social
Answer: D
Diff: 2 Page Ref: 195
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
16
Copyright © 2019 Pearson Education, Inc.
58) Firms may have incentives to cheat on cooperative agreements when maintaining a collusive
agreement has high ________ costs.
A) opportunity
B) strategic
C) signaling
D) social
Answer: A
Diff: 2 Page Ref: 195
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
59) The ability of firms to produce for inventory and to create order backlogs helps ________
tacit collusion.
A) avoid
B) ramp down
C) facilitate
D) prevent
Answer: C
Diff: 2 Page Ref: 196
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
60) Eight major firms in the rubber products industry are located in the same town. Company
managers from these firms all socialize at the same two private clubs and attend the same charity
events in town. This suggests that the ________ structure of the rubber industry in this town can
create opportunities for tacit collusion.
A) physical
B) cost
C) competitive
D) social
Answer: D
Diff: 2 Page Ref: 195
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
17
Copyright © 2019 Pearson Education, Inc.
61) While a number of industry attributes have an effect on the level of opportunity for tacit
collusion in an industry, none is more important than ________.
A) cost homogeneity
B) product homogeneity
C) the industry social structure
D) the existence of barriers to entry
Answer: D
Diff: 2 Page Ref: 196
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
Gamma Food Products competes in the "center-of-the-aisle" packaged foods business. Ever since
its founding and membership in the industry, the company has focused on gaining market share.
In 2017, it had, by far, the largest market share in the industry and used this advantage to create
order and discipline in the industry, particularly in terms of prices. Starting in late 2016, Gamma
Food Products' VP of Marketing, Polly Kundig noticed the heads of Gamma's four largest
competitors were meeting often surreptitiously, particularly at trade shows. Parallelly, Kundig
also noticed that the four firms were pricing their products at around the same level and distinct
from the prices of others, including Gamma. In addition, when one of the four made a move in
pricing or capacity planning, the others made quick responses.
62) In 2017, Gamma Food Products is likely the ________ leader in the industry.
A) strategic
B) profitability
C) price
D) operational
Answer: C
Diff: 2 Page Ref: 194
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
63) The fact that Gamma Food Products' four competitors were pricing their products at around
the same level and reacting quickly to each other's moves suggests that they are ________.
A) signaling
B) competing
C) strategizing
D) organizing
Answer: A
Diff: 3 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
18
Copyright © 2019 Pearson Education, Inc.
64) If Polly Kundig decides that Gamma Food Products should react by either decreasing its
prices or increase its output, the company is sending out a(n) ________ signal.
A) soft
B) strategic
C) operational
D) tough
Answer: A
Diff: 3 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
65) If Polly Kundig and Gamma Food Products indicate that the company will not cut its prices
nor increase its capacity, it is sending out a ________ signal.
A) tough
B) strategic
C) competitive
D) soft
Answer: D
Diff: 2 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
66) Gamma Food Products finds that its core product, a fruit-based yogurt is losing steam to
Greek yogurt. Polly Kundig decides not to get into Greek yogurt because doing so will force
Gamma to compete directly with Greek yogurt firms. Gamma's decision is called ________.
A) "puppy-dog ploy"
B) "fat-cat effect"
C) "top-dog strategy"
D) "lean-and-hungry look"
Answer: A
Diff: 3 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
19
Copyright © 2019 Pearson Education, Inc.
67) Gamma Food Products' industry is facing intense competition and both tacit and explicit
collusion. Since price is the primary basis of competition in the packaged foods industry, it is
recommended that Gamma Food Products invest proactively in ________ signals.
A) tough
B) soft
C) explicit
D) financial
Answer: B
Diff: 2 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Application of Knowledge
69) The reason that collusion is a difficult strategy to maintain over time is because the parties to
the collusion have strong incentives to cheat on these cooperative agreements.
Answer: TRUE
Diff: 2 Page Ref: 184
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
70) According to Cournot cheating, assuming little or no product differentiation among a small
number of firms, if one firm decides to cheat on a collusive agreement by reducing its prices,
others will as well and, in the long run, firms in this industry will earn no economic profits.
Answer: FALSE
Diff: 3 Page Ref: 185
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
20
Copyright © 2019 Pearson Education, Inc.
71) In Bertrand cheating, Joseph Bertrand makes the realistic assumption that each time cheating
firms adjust their prices, they assume that other firms in the industry will continue cooperating.
Answer: FALSE
Diff: 2 Page Ref: 185
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
72) Economist and mathematician Joseph Bertrand examined what happens to profits when
colluding firms begin cheating by lowering prices below the cooperative price.
Answer: TRUE
Diff: 2 Page Ref: 185
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
73) Bertrand's analysis suggests that the superior profits that can be obtained by colluding firms
are quite robust.
Answer: FALSE
Diff: 1 Page Ref: 185
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
74) Cournot examined the performance consequences if colluding firms cheat by adjusting the
quantity of their output and let market forces determine prices.
Answer: TRUE
Diff: 2 Page Ref: 186
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
75) In examining cheating via collusion, where Bertrand focused on quantity produced, Cournot
focused on prices.
Answer: FALSE
Diff: 2 Page Ref: 186
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
21
Copyright © 2019 Pearson Education, Inc.
76) The performance results associated with both Bertrand cheating and Cournot cheating
depend on assumptions that firms make about how other firms will respond to their own
cheating.
Answer: TRUE
Diff: 2 Page Ref: 188
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
77) Both Bertrand and Cournot, in their collusion cheating models, assume that firms take other
firms' prices/outputs in the previous period as variable.
Answer: FALSE
Diff: 2 Page Ref: 188
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
78) Generally, long-run profits for firms that cheat on purely collusive agreements in various
ways fall somewhere between the perfect competition, zero-economic-profit solution and the
perfect cooperation, shared-monopoly-profit solution.
Answer: TRUE
Diff: 2 Page Ref: 188
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
79) Instead of communicating directly, explicitly colluding firms send and interpret signals of
intent to cooperate (or intent not to cooperate) sent by potential collusion partners.
Answer: FALSE
Diff: 2 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
80) A "tough" signal is one where the signaling firm indicates that they will aggressively respond
to cheating.
Answer: TRUE
Diff: 2 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
22
Copyright © 2019 Pearson Education, Inc.
81) A "soft" signal is an indication that the signaling firm will not aggressively respond to
cheating.
Answer: TRUE
Diff: 1 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
82) Conscious parallelism is not subject to antitrust laws because it is not considered explicit
collusion.
Answer: FALSE
Diff: 2 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
83) If the probability of detecting cheating in a collusive industry is high, the likelihood that
cheating in this industry will actually occur is high.
Answer: FALSE
Diff: 2 Page Ref: 190
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
84) Tacit collusion is more likely to be successful if there is a small number of firms in an
industry.
Answer: TRUE
Diff: 2 Page Ref: 192
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
85) Tacit collusion is more likely when firms produce and sell similar products or services.
Answer: TRUE
Diff: 2 Page Ref: 192
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
23
Copyright © 2019 Pearson Education, Inc.
86) Homogeneity of economic costs enhances the opportunities to implement tacit collusion.
Answer: TRUE
Diff: 2 Page Ref: 194
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
87) A "price leader" is the firm that sells at the lowest price in the industry.
Answer: FALSE
Diff: 2 Page Ref: 194
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
88) Industry economic structure refers to accepted norms of behavior and competition that often
evolve in industries.
Answer: FALSE
Diff: 3 Page Ref: 195
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
89) Firms may have incentives to cheat on cooperative agreements when maintaining a collusive
agreement has high opportunity costs.
Answer: TRUE
Diff: 1 Page Ref: 195
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
90) The ability of firms to produce for inventory and to create order backlogs helps reduce tacit
collusion.
Answer: FALSE
Diff: 2 Page Ref: 196
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
24
Copyright © 2019 Pearson Education, Inc.
91) How does signaling relate to collusion?
Answer: In tacit collusion, firms agree to reduce competition but do so without face to face
negotiations. Tacit collusion, in short, is implemented via signals and signaling. Signaling both
promotes tacit collusion as well as work to reduce the impact of such collusion. Signals can be
tough or soft. In a tough signal, if parties cheat on collusive agreements, the firm sending the
signal will decrease prices more or increase output more than would have otherwise been the
case. Tough signals keep tacit collusion in check. In contrast, in a soft signal, if parties cheat on
collusive agreements, the firm sending the signal will decrease its prices less or increase its
output less than would have otherwise been the case. Essentially, the firm sending a soft signal is
indicating that it is avoiding competition.
Diff: 1 Page Ref: 189
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
93) Who are price leaders and what effect does their presence have on tacit collusion?
Answer: A price leader is a firm that sets "acceptable" industry prices or "acceptable" profit
margins in an industry. Typically, the price leader is the one with the largest market share. This
helps create the order and discipline needed to make tacit collusion last over time. Also, a price
leader can assist an industry adjusting to higher or lower prices, without jeopardizing an overall
cooperative agreement, by defining industry standards for price or margin changes. Thus, the
existence of a price leader creates opportunities for tacit collusion in an industry.
Diff: 2 Page Ref: 194
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
25
Copyright © 2019 Pearson Education, Inc.
94) While there are several industry attributes that facilitate tacit collusion, entry barriers are
considered the most important. Why?
Answer: Without barriers to entry, the economic profits associated with tacit collusion create
incentives for firms to enter into an industry. New entry into an industry reduces the collusion-
enhancing attributes of the other industry characteristics. For example, new entry is likely to
create both product heterogeneity (as new firms introduce new products) and cost heterogeneity
(new firms often have costs different from colluding incumbents). In general, new entrants can
be thought of as loose cannons in otherwise placid and calm industries. To reduce the threat of
new entrants, tacitly colluding firms must be protected by barriers to entry.
Diff: 2 Page Ref: 196
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
95) How does industry social structure explain collusion among Major League Baseball
franchises in the 1980s?
Answer: Industry social structure refers to accepted norms of behavior and competition that
often evolve in industries. These norms are usually implicit and constitute what might be called
an industry culture. While each Major League Baseball franchise is independently owned,
franchise owners must cooperate in leagues to establish playing schedules, a common set of
rules, and other operating standards. While engaging in this legal cooperation, informal
agreements not to bid aggressively on free agents were apparently struck. An arbitrator ruled that
the owners had colluded.
Diff: 1 Page Ref: 195
Learning Obj.: 7.3: Describe Different Ways That Collusive Agreements can Fall Apart, and
How it is Possible to Use the Attributes of an Industry to Anticipate How Sustainable These
Agreements are Likely to Be.
AACSB: Analytical Thinking
96) One of the most significant organizational issues facing tacitly colluding firms concerns the
________.
A) reputation of the firm
B) efficiency of their operations
C) financial viability of their products
D) effect on their employees
Answer: B
Diff: 2 Page Ref: 197
Learning Obj.: 7.4: Describe Two Unique Challenges Associated With Organizing to
Implement a Collusion Strategy.
AACSB: Analytical Thinking
26
Copyright © 2019 Pearson Education, Inc.
97) One of the most significant organizational issues facing tacitly colluding firms concerns the
efficiency of their operations.
Answer: TRUE
Diff: 1 Page Ref: 197
Learning Obj.: 7.4: Describe Two Unique Challenges Associated With Organizing to
Implement a Collusion Strategy.
AACSB: Analytical Thinking
27
Copyright © 2019 Pearson Education, Inc.
Another random document with
no related content on Scribd:
The Project Gutenberg eBook of Ihmiskohtalo
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
restrictions whatsoever. You may copy it, give it away or re-use it
under the terms of the Project Gutenberg License included with this
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you are located before using this eBook.
Title: Ihmiskohtalo
Kuvaus tilattoman elämästä
Language: Finnish
Kirj.
VÄINÖ KATAJA
1.
Mies, joka Törmälän ladon luota Riekkolan väen niittoa katseli, oli
Koski-Samuli, Törmälän torppari. Hän oli istunut, ladon seinän
viereen, nojasi selkäänsä siihen, käsivarret ristissä vatsan yli, ja
voihki ja valitteli hiljaa. Samuli ei vielä ollut vanha mies, vaikka
vanhalta jo näytti. Pitkä varsi oli jo kumarassa, ja ruumis oli niin
luisevan laiha, että melkein luusolmut paidan ja puseron alta
kyhmyinä kohosivat. Kasvot olivat kalpean laihat ja silmät mustien
renkaiden ympäröimät. Rasittuneelta, kivulloiselta ja surkastuneelta
näytti mies.
»Joko sitä Samulia taas vanha vika alkoi haitata?» sanoi hän, kun
Samulin näki paistelemassa rintaansa. »Taisi eilinen hankoaminen
tehdä pahaa… Sinä yrität liian ruttoon… pitäisi sinun säästää itseäsi,
ennenkuin miehuus kokonaan loppuu…»
2.
Kun kaiken voimansa pani liikkeelle ja yritti niin, että oli läkähtyä,
ja aina vain muiden hyväksi, silloin ne tulivat nämä huolet ja
surulliset ajatukset. Eivät ennen nuorempana rasittaneet, mutta kuta
vanhemmaksi tuli ja kun kipujen tunsi vuosi vuodelta enenevän ja
voimien vähenevän, sitä enemmän pani miettimään.
Niinkuin nytkin.
Hän muisti kuin tämän illan, kun lauttoineen tämän kylän ohi olivat
menossa. Ottivat lautat maihin tuohon Törmälän rantaan, ja taloon
nousivat miehet. Nyt siitä oli jo kolmaskolmatta kesä kulumassa.
Heinänteon aika oli.
Sillä siitä asti oli hän Törmälässä ollut, ei tosin vuosirenkinä, mutta
kesät talvet talon töitä tehden, milloin urakalla, milloin päiväläisenä.
Niin oli.
Oli kuin olisi ikäväksi mieli käynyt, kuin kättensä töitä katseli,
vaikka iloltahan siitä olisi pitänyt, että valmista oli tullut.