Which of the Following Would Increase the Likelihood That Firms

question 61

Multiple Choice

Which of the following would increase the likelihood that firms in an industry could successfully collude?

• A) a large number of firms in the industry
• B) unstable demand conditions in the industry
• C) high barriers to entry in the industry
• D) product characteristics that make it difficult for firms to detect other firms that cheat on the agreement

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Definitions:

Futures Contract

A forward contract with the feature that gains and losses are realized each day rather than only on the settlement date.

Forward Contract

A legally binding agreement between two parties calling for the sale of an asset or product in the future at a price agreed upon today.

Strike Price

The set price at which the holder of a financial instrument can buy or sell the underlying asset in options trading.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an asset at a specified price within a particular time period.