Question : 31) Collusion A) rampant in perfect competition as all firms charge : 1387870

31) Collusion

A) is rampant in perfect competition as all firms charge the same price.

B) reduces market concentration in an industry.

C) among firms is difficult to maintain because it eliminates long run economic profit.

D) is more difficult when there are many firms producing differentiated products in an industry.

32) Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

A) prevent rival airlines from competing in that market.

B) increase marginal revenue more than marginal cost.

C) maximize marginal revenue.

D) discourage rivals from matching price cuts.

33) There is much evidence to suggest that airlines are more likely to match price cuts than price increases. Which of the following best explains this evidence?

A) The law of demand which states that an increase in price leads to a decrease in quantity demanded.

B) No one airline wants to be the first to renege on a tacit collusive agreement in which all airlines implicitly agree to match price cuts but not price increases.

C) An airline fears that if it does not match a price cut, its sales may fall considerably but if it does not match a price increase, it will be able to attract customers away from its rivals.

D) Airlines have different costs of production and therefore it is more difficult to agree on a price increase than on a price decrease.

34) A cartel is

A) a temporary storage facility for automobiles.

B) a group of firms that enter into an informal agreement to fix prices to maximize joint profits.

C) a group of firms that enter into a formal agreement to fix prices to maximize joint profits.

D) an example of a group of firms that collectively regulate a competitive industry.

35) What is the incentive for a firm to join a cartel?

A) to be able to earn profits in the long run but not in the short run

B) to be able to earn larger profits than if it was not part of the cartel

C) to completely insulate itself from competition

D) to produce a larger amount of output than if it was not part of the cartel

36) A member of a cartel like OPEC has an incentive to

A) argue for larger production quotas for each member of the cartel.

B) agree to a low cartel production level and then produce more than its quota.

C) abide by its individual production quota.

D) support equal production quotas for each member.

37) In which of the following cartels is total cartel profit likely to be the highest?

A) a cartel made up of equal sized firms each producing different quantities of a differentiated product

B) a cartel made up of firms of various sizes each producing different quantities of a homogeneous product

C) a cartel made up of firms of various sizes each producing the same quantity of a differentiated product

D) a cartel made up of identical firms each producing the same quantity of a homogeneous product

38) Each member of OPEC can increase its income by selling more oil than its output quota because

A) by selling more at OPEC’s cartel price, a member will automatically earn more income. 

B) each member’s demand is more elastic than the total demand for oil.

C) the demand for oil is inelastic so total revenue increases.

D) the demand for oil is perfectly elastic.