The ABC Nail Company has entered into a collusive agreement with the other firm
ID: 1219591 • Letter: T
Question
The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement? ABC lowers the price of its nails. The total industry output increases. The total profits in the nail industry will decrease. All of the above answers are correct. Sears and Wal-Mart must decide whether to lower their prices based on the profits shown in the table below. Which of the following is TRUE? This situation is not a prisoners' dilemma. If Sears lowers its prices and Wal-Mart does not. Sears will make a $20 million economic profit. If Wal-Mart lowers its prices. Sears should keep its prices high. Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high. A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is called a limit pricing market. cartel contestable market. monopolistic competition market. Limit pricing is a strategy used by a firm to enhance short run profits. deter entry. raise its prices. lower its costs. Antitrust law is law that does not allow individuals to open trust savings accounts. prohibits competition in certain industries. prohibits certain kinds of market behavior by firms. allows firms under special circumstances to be a monopoly.Explanation / Answer
35. If ABC decides to cheat on an agreement then
D) All of the above answers are correct because to maximize its profit ABC will lower its price and by producing higher output.And as ABC's profit increases but at the same time DC Nail company's profit decreases, so total profit decreases.
36. If Wal-mart lowers its price, Sears should keep its prices high.
37. a market in which firms can enter and leave so easily that firms in the market face competition from potential entrants is called a (C) contestable market.
38.. limit pricing is a strategy used by a firm to (B) deter entry. This is done by lowering price of a commodity that its average cost of production so that it can be unprofitable and as a result restrict other players from entering the market.
38. Antitrust law is law that (C) prohibits certain kinds of market bejavior by firms. option A is because antitrust law has nothing to do with trust savings accounts, option B and D are wrong because antitrust law ensures competition in the market.
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