Exercises 4. Q1: What do we mean by duopoly?

Q1: What do we mean by duopoly?

Answer: The market consists of … producer(s)

(a) one

(b) two

(c) three

(d) many

Q2: Why can it be dangerous for potential buyers to face a duopolistic market structure?

Answer: Because prices will be… than in case of a … competition

(a) higher, perfect

(b) lower, imperfect

(c) lower, perfect

(d) higher, imperfect

Q3: Who are the main shareholders of Airbus?

(a) Americans

(b) Japanese

(c) Europeans

(d) Asians

Q4: How do we call the parent company of Airbus?

European … and Space Company

(a) Air

(b) Aeronautic Defence

(c) Manufacturing

(d) Union

Q5: How do European governments intervene in the working of Airbus?

By providing …

(a) subsidies

(b) passengers

(c) technical and financial advice

(d) aid

Q6: According to neoclassical economics, is it reasonable to provide subsidy for any industry?

Answer: No, because on a(n) … market subsidisation is just a waste of public money (i.e. irresponsible spending of households’ taxes)

(a) sellers’

(b) oligopolistic

(c) competitive

(d) monopolistic

Q7: What is the fundamental aim of the EU by providing subsidies to Airbus?

Answer: To gain new …

(a) technology

(b) subsidies

(c) markets

(d) enemies

Q8: Why is it reasonable to gain new markets and to increase the size of a company?

Answer: Because of the prevalence of … returns to scale

(a) decreasing

(b) increasing

(c) constant

(d) economic

Q9: What is the role of WTO in the debate of the two giant companies?

Answer: To carefully investigate government … since these grants may violate the norms of … trade.

(a) subsidies, free

(b) policies, fair

(c) officials, fair

(d) aids, perfect

B) Q1: According to the authors, the rivalry between Boeing and Airbus is based on product differentiation. CORRECT

Q2: By product differentiation it is meant that producers try to provide the same products but for different prices on the same market (i.e. on the market of commercial air-planes). INCORRECT (because in case of product differentiation producers try to differentiate one from another by producing different types of products on the same market

Q3: Airbus’ strategy is the following: it takes the current hub-and-spoke system as given. That is, the company assumes that airlines will continue to fly smaller planes on shorter routes into a few large hubs, then onward to the next hub on giant airplanes. CORRECT

Q4: Boeing’s understanding of the airplane market and buyers’ behaviour is the following: the average airplane size will increase in the near future, and customers prefer less point-to-point flights on smaller airplanes INCORRECT (according to Boeing, the average airplane size has declined slightly, and customers prefer more point-to-point flights on smaller airplanes than large jumbos on long distances.)

Q5: Boeing’s new product wishes to provide the utmost comfort to passengers. CORRECT

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