Multiple Choice Quiz

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1		A reaction function
			A)	is geared towards the process aspects of competitive processes.
			B)	specifies the best responses of all firms in a particular market.
			C)	is a relationship between the quantities produced in an industry.
			D)	is a profit maximizing strategy of a firm, given the strategies of the other firms.
2		If two firms operate in independent markets, then their reaction functions are
			A)	horizontal.
			B)	vertical.
			C)	downward sloping.
			D)	upward sloping.
3		A market is characterized by strategic complements when there is
			A)	price competition and substitute products.
			B)	quantity competition and substitute products.
			C)	price competition and complementary products.
			D)	none of the above.
4		Suppose the market is characterized by strategic substitutes. If firm 2 increases its quantity, then the reaction function of firm 1 will
			A)	shift to the right.
			B)	shift upward.
			C)	not shift.
			D)	shift to the left.
5		The level of investment of the incumbent firm determines the
			A)	entry decision.
			B)	hardness / softness of the investment.
			C)	slope of the reaction function.
			D)	location of the reaction function.
6		The strategy typology is based on a three stage game where the sequence of decisions consists of
			A)	number of firms, investment, entry.
			B)	investment, entry, competition.
			C)	entry, investment, competition.
			D)	aggressiveness, investment, entry.
7		If entry is inevitable, then the incumbent firm
			A)	will always choose an aggressive profile, regardless the nature of competition.
			B)	will choose either the Top Dog or Fat Cat investment strategy.
			C)	will elicit passive behaviour of the entrant.
			D)	likes to be the leader in the industry.
8		Which of the following is not important in determining the profit maximizing investment profile?
			A)	The nature of the investment.
			B)	The nature of competition.
			C)	The entry condition.
			D)	The number of competitors.
9		Suppose that entry is inevitable in a market. The profit maximizing investment profile is characterized as a ‘Fat Cat’ strategy in a market with
			A)	hard investments and strategic complements.
			B)	hard investments and strategic substitutes.
			C)	soft investments and strategic complements.
			D)	soft investments and strategic substitutes.
10		Suppose that there are two firms in an industry and that the investment is defined as hard. One firm might drive the other firm out of the market by using the
			A)	Top Dog strategy.
			B)	Puppy Dog strategy.
			C)	Lean and Hungry strategy.
			D)	Fat Cat strategy.