Question 1

Explicit collusion involves competitors directly communicating with each other to influence the nature of competition in ways that benefit both of them.

Accepted Answer

Explicit collusion refers to a situation where firms directly communicate with each other to coordinate their behavior and influence the market in ways that benefit both parties. This may involve agreements on pricing, production levels, market share, or other factors that affect competition. Explicit collusion is illegal in most jurisdictions and can result in significant fines, penalties, and legal sanctions.

Question 2

An oligopoly is a market structure with only a small number of competing firms.

Accepted Answer

An oligopoly is a market structure in which a few large firms dominate the market. These firms have significant market power and their pricing strategies have an impact on the industry as a whole.

Question 3

Scenario analysis is a technique of looking into the past that is particularly useful in non-volatile environments.

Accepted Answer

Scenario analysis is a technique of looking into the future, not the past. It involves developing multiple potential scenarios and analyzing the impact each one could have on a particular situation.

Question 4

Adam Smith's said 'People of the same trade seldom meet together, even for merriment and diversion, … but their conversation often ends in a conspiracy against the public.' What sort of behaviour was he referring to?

Accepted Answer

Adam Smith was referring to collusion, which is when businesses or individuals in the same industry conspire to manipulate prices, restrict competition, or engage in other anti-competitive behavior that harms the public.

Question 5

Leniency programmes by competition authorities create incentive to report illegal collusion which a company has become involved in.

Accepted Answer

Leniency programmes offer reduced or waived penalties for companies that voluntarily come forward and provide information about their involvement in illegal collusion. This creates an incentive for companies to report their illegal activities and encourages a culture of compliance with competition laws.

Question 6

Which of the following practices is not penalized by the European Union as a competition authority?

Accepted Answer

Entering another EU country without agreement of national authorities is not a competition law issue, but rather falls under the jurisdiction of national authorities such as immigration or customs. The other options listed are all violations of EU competition law and can result in significant penalties.

Question 7

A 'blue ocean' strategy aims to attack competitors without direct confrontation with incumbents.

Accepted Answer

A 'blue ocean' strategy involves creating a new market space where competition is irrelevant, rather than competing directly with existing players in a crowded market. Therefore, it aims to attack competitors without engaging in direct confrontations with incumbents.

Question 8

Sun Tzu's quote 'if you know the enemy and know yourself, your victory with stand in no doubt' points to the importance of:

Accepted Answer

Sun Tzu's quote emphasizes the importance of knowing both yourself and your enemy in order to achieve victory. In a business context, this translates to conducting a thorough competitor analysis to understand your competition and a resource analysis to understand your own strengths and weaknesses.

Question 9

Competitors are likely to strongly launch a counter attack if:

Accepted Answer

For a strong counterattack, all three conditions need to be present. The competitors need to be aware of the attack, motivated to counterattack, and have the capabilities to launch a successful counterattack. If any of these conditions are missing, the counterattack is likely to be weak or nonexistent. Therefore, option D is the best choice.

Question 10

Prisoner's dilemma is a concept from game theory that helps explaining why cartels often work effectively.

Accepted Answer

Prisoner's Dilemma actually illustrates why two rational individuals might not cooperate, even if it appears that it is in their best interest to do so, which can explain why cartels might fail to work effectively due to incentives for individual members to cheat on agreements.

Quiz 12: Foreign Entry Strategies