Which of the Following Conditions Would Increase the Likelihood of Successful

question 118

Multiple Choice

Which of the following conditions would increase the likelihood of successful collusion among American automobile producers?

• A) vigorous enforcement of antitrust laws
• B) strong quality competition that makes it difficult to monitor price cuts by rival firms
• C) imposition of tariffs or quotas on imported automobiles
• D) The market demand for automobiles fluctuates substantially.

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Definitions:

Diversifiable Risk

A type of investment risk that can be reduced or eliminated through portfolio diversification, as opposed to systemic risk which affects all investments.

Systematic Risk

The inherent risk that affects the entire market or a certain segment of the market, often influenced by factors like political, economic, and interest rate changes that cannot be mitigated through diversification.

Firm-specific Risk

The type of risk that affects a particular company or industry, as opposed to systemic risk, which affects the entire market.

Correlation Coefficient

A statistical measure that describes the extent to which two variables fluctuate together, ranging from -1 (perfect negative correlation) to +1 (perfect positive correlation).