If Firms Make Agreements That Reduce the Amount of Competition

question 49

Multiple Choice

If firms make agreements that reduce the amount of competition in a market,

• A)the market price usually falls
• B)they would face penalties under antitrust legislation
• C)mergers will result
• D)there must be diseconomies of scale in the industry
• E)they would face penalties under contract law

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Definitions:

Voting Shares

Shares of a corporation's stock that grant the shareholder the right to vote on corporate matters, such as the election of the board of directors.

Acquisition

The process by which one company takes control of another company by purchasing or exchanging equity.

Contingency Payment

A payment that depends on the occurrence of a specific condition or set of conditions in the future.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis, reflecting the time value of money and risk.