The Table Below Shows Annual Profits Received by Two Oligopolists

question 5

Multiple Choice

The table below shows annual profits received by two oligopolists, Alpha and Beta, depending on whether each company decides whether to live within the collusive agreement they have signed to charge a high price, or to cheat and charge a lower price.

$\begin{array}{}& \text {beta's Strategies }\\ \text {AlPHA'sStrategies }&\begin{array}{|l|c|c|}\hline & \begin{array}{c}\text { Don't } \\\text { }\end{array} & \text { Cheat } \\\hline \text { Don'tCheat} & \begin{array}{c}\text { B: } \$ 5 \mathrm{~m} \\\text { A: } \$ 5 \mathrm{~m}\end{array} & \begin{array}{c}\text { B: } \$ 6 \mathrm{~m} \\\text { A } \$ 3 \mathrm{~m}\end{array} \\\hline & \begin{array}{c}\text { B: } \$ 3 \mathrm{~m}\end{array} & \text { B: } \$ 4 \mathrm{~m} \\ \text { Cheat } & \$ 6 \mathrm{~m} & \text { A: } \$ 4 \mathrm{~m} \\\hline\end{array}\\\end{array}$
-Which of the following practices does not require proof that the actions taken "unduly restrain competition?"

• A)conspiracy
• B)abuse of a dominant position
• C)predatory pricing
• D)mergers
• E)bid-rigging

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Definitions:

Financial Statement Element

Components of financial statements, like assets, liabilities, equity, revenues, and expenses that provide structure to financial reporting.

Fair Value

The estimated market value of an asset or liability, reflecting the amount at which it could be exchanged between willing parties.

Historical Cost

The original monetary value of an asset or investment at the time of its purchase or acquisition.

Representationally Faithful

A qualitative characteristic of financial information that ensures the reported data accurately reflects the economic transactions and events.