Economics and Strategy 2

Question 1

What is a market for a good or service that is dominated by a small number of firms. As a result the actions of one affect others in the market. (Horizontal Merger)

Answer 1

An oligopoly

Question 2

In the trough of a business cycle

Answer 2

there is unused capacity and

an unwillingness to make investments.

Question 3

In a situation where the producer is located has the lower tax rate

Answer 3

1) the overall tax burden is lowered by maximizing the transfer price
2) This will maximize reported taxable income in the lower tax country

Question 4

Heterogeneous products
Advertising
large number of sellers of differentiated products
Economies or diseconomies of scale

Answer 4

are all the characteristics of monopolistic competition

Question 5

what is additional revenue received from the sale of one additional unit.

Answer 5

Marginal revenue

Question 6

what is the additional cost of producing one more unit

Answer 6

Marginal cost

Question 7

what reflects an increase or decrease in the quantity demanded.

Answer 7

Movement along the existing demand curve

Question 8

How do you hedge the transaction risk regarding to change in value of foreign country currency

Answer 8

Sell the currency by using a forward contract for delivery which locks in the purchase price

Question 9

Changes over time in the structure of consumer demand, which in turn alters the structure or composition of the demand for labor

Answer 9

structural unemployment

Question 10

As firms grow

Answer 10

they often experience economies of scale that increase their returns

Question 11

What is described as a game theory which models conflict and cooperation among decision makers

Answer 11

An oligopoly