A Government Should Use Subsidies to Support Promising Firms That

question 45

Multiple Choice

A government should use subsidies to support promising firms that are active in newly emerging industries,according to

• A)strategic trade policy.
• B)public policy.
• C)absolute advantage.
• D)product life-cycle.
• E)industrialization.

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Definitions:

Oligopolistic Industry

An industry characterized by a small number of firms that have significant control over market prices and high barriers to entry.

Collusion

Collusion is an agreement between two or more parties, often in secret, to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically involving fraud or gaining an unfair market advantage.

Cartels

An agreement between competing firms to control prices or exclude entry of a new competitor in a market, often resulting in higher prices and restricted competition.

Informal Understandings

Unofficial agreements or practices among firms or individuals that dictate behavior without being legally binding.