oligopoly questions from book

Question 1

• Explanation of one pricing strategy in the context of truck manufacturers

Answer 1

– e.g. predatory pricing
– e.g. limit pricing
– e.g. price war/undercutting rivals
– e.g. sales or revenue maximisation

Question 2

• Explanation of one non-pricing strategy in the context of truck manufacturers

Answer 2

– e.g. research and development
– e.g. improved trucks, such as fuel efficiency/reduced environmental damage
– e.g. better distribution
– e.g. after-sales service

Question 3

• Overt collusion

Answer 3

• Overt collusion involves forming a cartel/firms agreeing to restrict competition using a formal agreement (1 mark).

Question 4

. limit pricing

Answer 4

limit pricing is used to deter entry into a market

. limit pricing involves pricing below the potential entrant’s average cost

Question 5

predatory pricing

Answer 5

predatory pricing is attempting to put existing firms out of business

predatory pricing is pricing below average variable cost

Question 6

define the differenty types of collusion?

Answer 6

tacit collusion is when there is no formal collusion where as overt collusion is when there is a formal aggreemnegt

Question 7

explain the implacations of collusion?

Answer 7

first possible implactions would be higher prices whcih would then lead to higher profit, you guratee the most ideal situation - collbartation

damaged reprutation - fines

Question 8

diffculties of collusion ?

Answer 8

non trust - break collusion
hard to prove
stop future collusion the profits still exceed the cost
retaining collusion - 2 big and one small

Question 9

reason for collusion?

Answer 9

best ideal reveue as a result of a higher prices through collabration
gurateee profit

Question 10

role of ECC/CMA

Answer 10

promtoeing competiomn