Which of the following is NOT helpful to the successful operation of a cartel? : Economics Assignment, SMU, Singapore

Which of the following is NOT helpful to the successful operation of a cartel?

A. Market demand for the good is relatively inelastic.

B. The cartel is the unique supplier of the good.

C. Some cartel members have substantial cost advantages over other members.

D. Consumer preferences become more favorable for the good.

Which of the following statements is/are accurate?

A. Cartels are illegal in Singapore.

B. Once price and production levels are agreed upon, each member of a cartel has an incentive to  “cheat” on the agreement.

C. Both A and B.

D. None of the above is accurate.

The members of a collusive agreement may see their sales decreasing but they may not be sure if a member cheats because of which of the following reasons?

A. The suspected cheater may face a stronger demand than before.

B. The market demand in this industry has subsided.

C. Both A and B are possible.

D. None of the above.

Which of the following goods would be the most difficult to monitor for potential cheating of a collusive agreement?

A. Photo cameras.

B. Beef.

C. Software.

D. Used cars.

What happens to the profit maximizing collusive price and quantity if MC declines?

A. The firms are not price takers, so the change in MC has no impact on the outcome.

B. The firms must re‐agree on a lower price, so that each will sell a higher quantity and take  advantage of the lower MC.

C. The firms must maintain the same price and capture higher per‐unit profits.

D. The firms must re‐agree to charge a higher price in order to increase their profit margin now that  the marginal cost of production is lower.

Which of the following statements about natural monopolies is true?

A. For natural monopolies, MC is always below AC.

B. For natural monopolies, AC is always increasing.

C. Both A and B.

D. None of the above.

Scenario 6.1: Consider a market with a unique seller, the demand and cost structure of which is depicted in the figure.

According  to  scenario 6.1, what is  the profit maximizing price for  this seller?

A. Below or equal to 30 dollars.

B. Above 30 and below or equal to 58 dollars.

C. Above 58 and below or equal to 71 dollars.

D. Above 71 and below or equal to 82 dollars.

E. Above 82 and below or equal to 100 dollars.

F. Above 100 dollars.

According to scenario 6.1, how much should this seller set the price in order to eliminate the DWL?

A. Below or equal to 30 dollars.

B. Above 30 and below or equal to 58 dollars.

C. Above 58 and below or equal to 71 dollars.

D. Above 71 and below or equal to 82 dollars.

E. Above 82 and below or equal to 100 dollars.

F. Above 100 dollars.

According to scenario 6.1, if a regulator sets a price ceiling of $71, the seller will choose to produce how many units?

A. Below or equal to 6 units.

B. Above 6 units and below or equal to 17 units.

C. Above 17 units and below or equal to 20 units.

D. Above 20 units and below or equal to 28 units.

E. Above 28 units and below or equal to 44 units.

F. Above 44 units.

According to scenario 6.1, if a regulator sets a price ceiling of $71, what will the total revenue be for the seller?

A. Around 70 dollars.

B. Around 200 dollars.

C. Around 1,000 dollars.

D. Around 2,000 dollars.

E. Around 10,000 dollars.

According to scenario 6.1, a regulator considers legislating a price ceiling to maximize production. What is  the maximum quantity that a price ceiling can force the seller to produce?

A. Around 6 units.

B. Around 17 units.

C. Around 20 units.

D. Around 28 units.

E. Around 44 units.

According to scenario 6.1, above how many dollars does a price ceiling become non‐binding for the seller?

A. Above 30 dollars.

B. Above 58 dollars.

C. Above 71 dollars.

D. Above 82 dollars.

E. Above 100 dollars.

F. None of the above.

Scenario 6.2: Firm A creates a negative externality towards firm B. Because of the externality, B’s profits are reduced by 𝑑. Firm A can terminate the externality by investing 𝑖dollars. The firm’s A profit is 𝜋.

Firms A and B last and interact only for a single period after which they stop existing.

According to scenario 6.2, which of the following would firm B most likely choose if 𝜋 ൌ 500, 𝑑 ൌ 100 and  50?

A. Firm B would buy firm A by paying 𝜋 and close it down.

B. Firm B would transfer 𝑖 to firm A to stop the externality.

C. None of the above would benefit firm B.

According to scenario 6.2, which of the following would firm B most likely choose if 𝜋 ൌ 500, 𝑑 ൌ 800, and  400?

A. Firm B would buy firm A by paying 𝜋and close it down.

B. Firm B would transfer 𝑖 to firm A to stop the externality.

C. None of the above would benefit firm B.

According to scenario 6.2, which of the following would firm B most likely choose if 𝜋 ൌ 500, 𝑑 ൌ 400, and  700?

A. Firm B would buy firm A by paying 𝜋 and close it down.

B. Firm B would transfer 𝑖 to firm A to stop the externality.   C. None of the above would benefit firm B.

According to scenario 6.2, which of the following would firm B most likely choose if 𝜋 ൌ 500, 𝑑 ൌ 600, and  700?

A. Firm B would buy firm A by paying 𝜋 and close it down.

B. Firm B would transfer 𝑖 to firm A to stop the externality.

C. None of the above would benefit firm B.

Which of the following does NOT point towards the direction that an industry exhibits kinked demand?

A. There are indications of collusion.

B. Everyone knows that a price cut will be answered aggressively.

C. The products by different sellers are homogeneous.

D. A price increase by one firm will cause all other firms to increase their prices to

My cost per unit is 40 and your cost per unit is 30. Which of the following is considered predatory pricing?

A. If I charge less than 40.

B. If you charge less than 40.

C. If you charge less than 30.

D. All of the above.  4

E.None of the above.

Which of the following goods/services is the best example of a non‐excludable good?

A. Education.

B. Herd immunity.

C. Music.

D. Software.

E. Food.

Which of the following goods/services is the best example of a non‐rival good?

A. A dinner at a Vegetarian restaurant (not a sponsor).

B. A taxi ride.

C. A tennis private lesson.

D. A Spotify subscription.

E. A ticket to Athens.