Reference no: EM133280185

1. Assume that there are six firms in a country's carpet manufacturing industry and that they collude to restrict output, thereby maintaining a high price. Under which of the following circumstances is collusion likely to break down?

(a) The government imposes higher duties on imported carpets..................................... Yes / No

(b) Several new chains of discount carpet retailers enter the market............................... Yes / No

(c) One of the firms develops a new cost-saving technique of producing carpets.......... Yes / No

(d) Three of the smaller manufacturers merge................................................................. Yes / No

(e) One of the firms becomes dominant in the industry.................................................. Yes / No

(f) The demand for carpets falls...................................................................................... Yes / No

(g) Legislation is passed preventing the exchange of information by producers on costs, sales and product development......................................................................... Yes / No

2. Which of the following are examples of tacit collusion?

(a) Price leadership by a dominant firm........................................................................... Yes / No

(b) Agreements 'behind closed doors'.............................................................................. Yes / No

(c) Discounts to retailers.................................................................................................. Yes / No

(d) Setting prices at a well-known benchmark................................................................. Yes / No

(e) Increased product differentiation within the industry................................................ Yes / No

(f) Price leadership by a barometric firm........................................................................ Yes / No