Which of the following does not hinder successful price leadership?
a. all of the following are correct
b. potentially large economic profits due to this activity
c. cheating by offering secret discounts
d. product differentiation
e. illegality of coordinated pricing
QUESTION 2In Niskanen's theory, bureaucrats obtain the budget they want by
a. lowering prices to consumers
b. raising prices to consumers
c. promising to produce more efficiently
d. threatening legislatures with an all-or-nothing choice
e. allowing legislators to cut particular items from their budget
QUESTION 3Tacit collusion occurs in industries that
a. are monopolistically competitive
b. contain price leaders
c. experience rapid technological change
d. are regulated
e. produce very differentiated products
QUESTION 4If the legislature has a line-item veto on a bureau's budget, the bureau
a. can no longer present its entire budget as a package deal for provision of services
b. will have more power than if the legislature used an overall budget ceiling
c. will be able to supply its output to the legislature as a monopolist
d. will try to discourage budget cuts by threatening to make cuts that will cause the legislature the least political trouble
e. will be free to pursue its own overall objectives
QUESTION 5Suppose a firm that sells a variety of athletic shoes is trying to start a pattern of price leadership in its market. Which of the following is not a problem this firm might have to face?
a. Rivals recognize the intent of its actions.
b. Other firms may not necessarily follow the leader.
c. Other firms may not follow the leader but offer better service instead.
d. Differentiation among products allows for more variation in price.
e. The price leader must keep costs lower than other firms'.
QUESTION 6Government bureaus, unlike private firms,
a. derive their revenue by selling output to the government
b. have incentives to respond to consumers' desires
c. price their output by equating marginal cost and marginal revenue
d. attempt to achieve zero profit
e. receive little consumer feedback
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