question
The owner of Bob's Breakfast just bought Nancy's Famous Breakfast across the street. They offer the same breakfast items on the menu. The demand for Bob's Breakfast is more elastic than Nancy's Famous Breakfast. What should the owner do?
A
Reduce the prices at Nancy's Famous Breakfast
B
Raise the prices at Bob's Breakfast
C
Raise the prices at both restaurants equally
D
Raise the prices at both restaurants, but raise the price of Bob's Breakfast more
A
Reduce the prices at Nancy's Famous Breakfast
B
Raise the prices at Bob's Breakfast
C
Raise the prices at both restaurants equally
D
Raise the prices at both restaurants, but raise the price of Bob's Breakfast more
answer
D
Raise the prices at both restaurants, but raise the price of Bob's Breakfast more
Raise the prices at both restaurants, but raise the price of Bob's Breakfast more
question
In a principal-agent relationship, the principal's goal is to
A
Control the agent
B
Pay the agent
C
Align agent's incentives with principal's goals
D
Eradicate shirking
A
Control the agent
B
Pay the agent
C
Align agent's incentives with principal's goals
D
Eradicate shirking
answer
C-
Align agent's incentives with principal's goals
Align agent's incentives with principal's goals
question
You are considering entry into a market in which there is currently only one producer (incumbent). Entry will require $20k in fixed costs per year (avoidable at the end of each year). If you enter, the incumbent can take one of two strategies, price low or price high. If they price high, then you expect a $60k profit per year. If they price low, then you expect a $20k loss per year. You should enter if you believe:
A
Demand is inelastic
B
The probability that the incumbent will price low is greater than 0.75
C
The probability that the incumbent will price low is less than 0.75
D
The entry decision depends on the size of the market
A
Demand is inelastic
B
The probability that the incumbent will price low is greater than 0.75
C
The probability that the incumbent will price low is less than 0.75
D
The entry decision depends on the size of the market
answer
C
The probability that the incumbent will price low is less than 0.75
The probability that the incumbent will price low is less than 0.75
question
A video store believes there are two equally sized consumer groups with different values for two DVDs as follows: Segment 1 values DVD A at $10 and DVD B at $8 Segment 2 values DVD A at $4 and DVD B at $12 There are estimated to be 50 consumers in each group. The store currently has 100 of each DVD on hand. It paid $10 for each DVD. If it is unable to sell them all it can return them to the distributor for $4 each. To maximize profit contribution from the sale (or return) of these DVDs the store should
A
Set a standard price of $8 for each DVD
B
Set a price of $10 for A and $12 for B
C
Offer A and B together for a price of $16
D
Offer A and B together for a price of $18
E
None of the above
A
Set a standard price of $8 for each DVD
B
Set a price of $10 for A and $12 for B
C
Offer A and B together for a price of $16
D
Offer A and B together for a price of $18
E
None of the above
answer
C.
Offer A and B together for a price of $16
Offer A and B together for a price of $16
question
Which of the following is an example of an effective screening technique?
A
A car maker advertising the high quality of their car
B
A customer providing an insurance company with his/her credit report
C
A company asking the average speed you drive
D
A person who decides to pursue his MBA
A
A car maker advertising the high quality of their car
B
A customer providing an insurance company with his/her credit report
C
A company asking the average speed you drive
D
A person who decides to pursue his MBA
answer
C
A company asking the average speed you drive
A company asking the average speed you drive
question
If two firms producing substitutes agree to fix prices, then their prices will 1.____________ . If two firms producing complements agree to fix prices, then their prices will 2.____________ .
A
1. increase; 2. increase
B
1. decrease; 2. decrease
C
1. increase; 2. decrease
D
1. decrease; 2. increase
A
1. increase; 2. increase
B
1. decrease; 2. decrease
C
1. increase; 2. decrease
D
1. decrease; 2. increase
answer
C.
1. Decrease; 2. Decrease
1. Decrease; 2. Decrease
question
When a home in Nashville went up for sale, the person interested in buying a home wanted to have the house inspected. The person selling the home encouraged the buyer to inspect the house before the sale is final. Which statement is true?
A
The buyer is signaling
B
The seller is screening
C
The buyer is trying to solve the problem of adverse selection
D
None of the above
A
The buyer is signaling
B
The seller is screening
C
The buyer is trying to solve the problem of adverse selection
D
None of the above
answer
C.
The buyer is trying to solve the problem of adverse selection
The buyer is trying to solve the problem of adverse selection
question
Which feature is NOT included in the best strategies that earn the highest profit in a repeated Prisoner's Dilemma?
A
Be nice
B
Be forgiving
C
Be easily provoked
D
Be envious
A
Be nice
B
Be forgiving
C
Be easily provoked
D
Be envious
answer
D.
Be envious
Be envious
question
Market competition led to the rise of franchising in the 1950s. The franchiser (the company owning the franchise) gives the franchisee (external entity) the right and all the know-how to sell or give out services of that company using its image, logos, and publicity methods in return for a fixed or variable franchise fee. The success of the franchising system is attributed to the following factors EXCEPT
A
Cost advantage of group affiliation for national advertising and quantity discounts
B
Easy monitoring of quality
C
High incentives for franchisees to maximize sales
D
Decentralization of decision rights to franchisees in running the operation
A
Cost advantage of group affiliation for national advertising and quantity discounts
B
Easy monitoring of quality
C
High incentives for franchisees to maximize sales
D
Decentralization of decision rights to franchisees in running the operation
answer
B.
Easy monitoring of quality
Easy monitoring of quality
question
Ten bidders in an oral auction have the following values for an antique clock ($10, $9, $8, $7, $6, $5, $4, $3, $2, $1). If bidders of the $10 and $9 bids collude and bidders of the $3, $4, and $5 bids collude, what will the winning price be?
A
$10
B
$8
C
$6
D
$5
A
$10
B
$8
C
$6
D
$5
answer
B. $8
question
Why might a company use an indirect price discrimination scheme versus direct price discrimination?
A
The different customer types shop at different stories
B
The demand for each customer type is the same
C
The different customer types cannot be uniquely identified directly
D
The company can prevent arbitrage between its different customer types
A
The different customer types shop at different stories
B
The demand for each customer type is the same
C
The different customer types cannot be uniquely identified directly
D
The company can prevent arbitrage between its different customer types
answer
C. The different customer types cannot be uniquely identified directly.
question
A suntan lotion company is interested in expanding to another market. In Miami, there is a 60% chance of selling 5,000 units at a $5 profit/unit, a 20% chance of selling 4,000 at an $8 profit/unit, and a 20% chance of losing $5,000. In Las Vegas, there is a 70% chance of selling 5,000 units at a $6 profit/unit, a 20% chance of selling 4,000 at a $7 profit/unit, and a 10% chance of losing $5,000. Finally, in San Diego, there is a 40% chance of selling 8,000 units at a $9 profit/unit, a 20% chance of selling 4,000 at a $9 profit/unit, and a 40% chance of losing $20,000. To enter each market there is a cost of $15,000. What market should the company enter?
A
Miami
B
Las Vegas
C
San Diego
D
Do not enter any market
A
Miami
B
Las Vegas
C
San Diego
D
Do not enter any market
answer
C. San Diego
question
When are collisions least likely to occur?
A
Oral Auctions
B
Second-Price Auctions
C
Small, frequent auctions
D
Big, infrequent auctions
A
Oral Auctions
B
Second-Price Auctions
C
Small, frequent auctions
D
Big, infrequent auctions
answer
D. Big, infrequent auctions
question
Which is NOT an example of bundling?
A
An extra value meal at Wendy's
B
A buy-one-get-one-half-off sale at Foot Locker
C
Microsoft Office
D
A large tub of popcorn at the movie theater
A
An extra value meal at Wendy's
B
A buy-one-get-one-half-off sale at Foot Locker
C
Microsoft Office
D
A large tub of popcorn at the movie theater
answer
D. A large tub of popcorn at the movie
question
Which of the following questions should NOT be asked when trying to diagnose an organizational problem?
A
Does the decision maker have the right incentives to make a good decision?
B
Who is making the bad decision?
C
Does the decision maker have enough information to make a good decision?
D
Is the decision maker a team player?
A
Does the decision maker have the right incentives to make a good decision?
B
Who is making the bad decision?
C
Does the decision maker have enough information to make a good decision?
D
Is the decision maker a team player?
answer
D. Is the decision maker a team player?
question
After acquiring a substitute product, to achieve greater profitability, one should
A
Raise price on both products, but raise the price more on the less price elastic product
B
Raise price on both products, but raise the price more on the more price elastic product
C
Raise price on just the less price product
D
Raise price on just the more price elastic
A
Raise price on both products, but raise the price more on the less price elastic product
B
Raise price on both products, but raise the price more on the more price elastic product
C
Raise price on just the less price product
D
Raise price on just the more price elastic
answer
B. Raise price on both products, but raise price more on the more price elastic product
question
An oral auction with values of $4, $6, $9, $12, $13, and $15 is currently taking place. What will the winning bidder pay?
A
10
B
11
C
13
D
15
A
10
B
11
C
13
D
15
answer
C. 13
question
If a tire company knows that customers buying insurance for their tires will increase the likelihood of being reckless, there is a problem of _____________. In order to combat this problem, the tire company should__________.
A
Adverse selection; obtain more information about the customer's driving record before selling insurance
B
Moral hazard; obtain more information about the customer's driving record before selling insurance
C
Adverse selection; require the customer to sign a contract that states that insurance does not cover tire repair for reckless driving
D
Moral hazard; require the customer to sign a contract stating that insurance does not cover tire repair for reckless driving
A
Adverse selection; obtain more information about the customer's driving record before selling insurance
B
Moral hazard; obtain more information about the customer's driving record before selling insurance
C
Adverse selection; require the customer to sign a contract that states that insurance does not cover tire repair for reckless driving
D
Moral hazard; require the customer to sign a contract stating that insurance does not cover tire repair for reckless driving
answer
D. Moral hazard; require the customer to sign a contract stating that insurance does not cover tire repair for reckless driving
question
Which of the following are stressed in the strategic view of bargaining?
A
How the outcome of the bargaining game depends on who moves first
B
How the outcome of a bargaining game depends on who can commit to a bargaining position
C
How the outcome of a bargaining depends on whether the other player can make a counteroffer
D
All of the above
A
How the outcome of the bargaining game depends on who moves first
B
How the outcome of a bargaining game depends on who can commit to a bargaining position
C
How the outcome of a bargaining depends on whether the other player can make a counteroffer
D
All of the above
answer
D. All of the Above
question
Domino Sugar Company is considering buying Fisher Honey Company for $100 million. Based on information obtained from 500 supermarkets around the country, when the price of 1 lb. of Domino Sugar went on sale from $2.00 to $1.50, the average number of 1 lb. boxes of sugar rose from 200 boxes in a week to 300 boxes. The following week, when 1 lb. boxes of Fisher Honey went on sale for $2.50 from the original price of $3.00, the number of boxes of honey sold increased from 200 to 275 boxes. If the sale of Fisher Honey to Domino Sugar goes through, what changes to each product's price will Domino Sugar make?
A
No change
B
Increase the price of both but increase the price of Domino Sugar more
C
Increase the price of both but increase the price of Fisher Honey more
D
Lower the price of both
A
No change
B
Increase the price of both but increase the price of Domino Sugar more
C
Increase the price of both but increase the price of Fisher Honey more
D
Lower the price of both
answer
C. Increase the price of both but increase the price of Fisher Honey more
question
Why might a company use an indirect price discrimination scheme versus direct price discrimination?
A
The different customer types shop at different stories
B
The demand for each customer type is the same
C
The different customer types cannot be uniquely identified directly
D
The company can prevent arbitrage between its different customer types
A
The different customer types shop at different stories
B
The demand for each customer type is the same
C
The different customer types cannot be uniquely identified directly
D
The company can prevent arbitrage between its different customer types
answer
C. The different customer types cannot be uniquely identified directly.
question
The demand for insurance arises from people who are
A
Risk-seeking
B
Risk-neutral
C
Risk-averse
D
None of the above
A
Risk-seeking
B
Risk-neutral
C
Risk-averse
D
None of the above
answer
C. Risk-averse
question
A suntan lotion company is interested in expanding to another market. In Miami, there is a 60% chance of selling 5,000 units at a $5 profit/unit, a 20% chance of selling 4,000 at a $8 profit/unit, and a 20% chance of losing $5,000. In Las Vegas, there is a 70% chance of selling 5,000 units at a $6 profit/unit, a 20% chance of selling 4,000 at a $7 profit/unit, and a 10% chance of losing $5,000. Finally, in San Diego, there is a 40% chance of selling 8,000 units at a $9 profit/unit, a 20% chance of selling 4,000 at a $9 profit/unit, and a 40% chance of losing $20,000. To enter each market there is a cost of $15,000. What market should the company enter?
A
Miami
B
Las Vegas
C
San Diego
D
Do not enter any market
A
Miami
B
Las Vegas
C
San Diego
D
Do not enter any market
answer
C. San Diego
question
If you are an auctioneer in a common-value auction you should do all of the following EXCEPT
A- Encourage everyone to bid aggressively
B- Reduce the uncertainty of the value of the item
C- Hide adverse information that would devalue the item
D- Release as much information about the item as possible
A- Encourage everyone to bid aggressively
B- Reduce the uncertainty of the value of the item
C- Hide adverse information that would devalue the item
D- Release as much information about the item as possible
answer
C. Hide adverse information that would devalue the item
question
If a tire company knows that customers buying insurance for their tires will increase the likelihood of being reckless, there is a problem of _____________. In order to combat this problem, the tire company should__________.
A- Adverse selection; obtain more information about the customer's driving record before selling insurance
B- Moral hazard; obtain more information about the customer's driving record before selling insurance
C- Adverse selection; require the customer to sign a contract that states that insurance does not cover tire repair for reckless driving
D- Moral hazard; require the customer to sign a contract stating that insurance does not cover tire repair for reckless driving
A- Adverse selection; obtain more information about the customer's driving record before selling insurance
B- Moral hazard; obtain more information about the customer's driving record before selling insurance
C- Adverse selection; require the customer to sign a contract that states that insurance does not cover tire repair for reckless driving
D- Moral hazard; require the customer to sign a contract stating that insurance does not cover tire repair for reckless driving
answer
D. Moral Hazard; Require the customer to sign a contract stating that insurance does not cover tire repair for reckless driving.
question
After acquiring a substitute product, to achieve greater profitability, one should
A- Raise price on both products, but raise price more on the less price elastic product
B- Raise price on both products, but raise price more on the more price elastic product
C- Raise price on just the less price product
D- Raise price on just the more price elastic
A- Raise price on both products, but raise price more on the less price elastic product
B- Raise price on both products, but raise price more on the more price elastic product
C- Raise price on just the less price product
D- Raise price on just the more price elastic
answer
B. Raise price on both products, but raise price more on the more price elastic product
question
You've just decided to add a new line to your manufacturing plant. Compute the expected loss/profit from the line addition if you estimate the following: There is a 70% chance that profits will increase by $100,000. There is a 20% chance that profits will remain the same. There is a 10% chance that profits will decrease by $15,000.
A- Loss of $15,000
B- Gain of $68,500
C- Gain of $ 71,500
D- Gain of $100,000
A- Loss of $15,000
B- Gain of $68,500
C- Gain of $ 71,500
D- Gain of $100,000
answer
B. Gain of $68,500
question
If you were attempting to reduce the possibility of moral hazard with your employees using corporate car insurance, you would NOT
A- Hire a private investigator to follow your employees while they drive
B- Reward employees for safe driving
C- Remove all the safety features from your employees' cars
D- Try to determine which employees are safe drivers before offering them insurance
A- Hire a private investigator to follow your employees while they drive
B- Reward employees for safe driving
C- Remove all the safety features from your employees' cars
D- Try to determine which employees are safe drivers before offering them insurance
answer
D. Try to determine which employees are safe drivers before offering them insurance
question
You are considering entry into a market in which there is currently only one producer (incumbent). Entry will require $20k in fixed costs per year (avoidable at the end of each year). If you enter, the incumbent can take one of two strategies, price low or price high. If they price high, then you expect a $60k profit per year. If they price low, then you expect a $20k loss per year. You should enter if you believe:
A- Demand is inelastic
B- The probability that the incumbent will price low is greater than 0.75
C- The probability that the incumbent will price low is less than 0.75
D- The entry decision depends on the size of the market
A- Demand is inelastic
B- The probability that the incumbent will price low is greater than 0.75
C- The probability that the incumbent will price low is less than 0.75
D- The entry decision depends on the size of the market
answer
C. The probability that the incumbent will price low is less than 0.75
question
Which of the following conditions must be satisfied with a successful price discrimination scheme?
A- The seller must be able to identify different customer groups with different demand elasticities
B- The seller must be able to prevent arbitrage between the two groups
C- Neither A & B
D- Both A & B
A- The seller must be able to identify different customer groups with different demand elasticities
B- The seller must be able to prevent arbitrage between the two groups
C- Neither A & B
D- Both A & B
answer
D. Both A & B
question
The higher cost for a refundable airline ticket for business travelers can be explained by
A- Price discrimination
B- Indirect price discrimination
C- Bundling
D- Marginal revenue vs. marginal cost
A- Price discrimination
B- Indirect price discrimination
C- Bundling
D- Marginal revenue vs. marginal cost
answer
B. indirect price discrimination
question
In a principal-agent relationship, the principal's goal is to
A- Control the agent
B- Pay the agent
C- Align agent's incentives with principal's goals
D- Eradicate shirking
A- Control the agent
B- Pay the agent
C- Align agent's incentives with principal's goals
D- Eradicate shirking
answer
C. Align agent's incentives with principal's goals
question
If promotional expenditures make demand
A- More elastic, then you should reduce price when you promote the product
B- More elastic, then you should increase price when you promote the product
C- Less elastic, then you should reduce price when you promote the product
D- Less inelastic, then you should increase price when you promote the product
A- More elastic, then you should reduce price when you promote the product
B- More elastic, then you should increase price when you promote the product
C- Less elastic, then you should reduce price when you promote the product
D- Less inelastic, then you should increase price when you promote the product
answer
A. More elastic, then you should reduce price when you promote the product
question
Which of the following is an example of an effective screening technique?
A- A car maker advertising the high quality of their car
B- A customer providing an insurance company with his/her credit report
C- A company asking the average speed you drive
D- A person who decides to pursue his MBA
A- A car maker advertising the high quality of their car
B- A customer providing an insurance company with his/her credit report
C- A company asking the average speed you drive
D- A person who decides to pursue his MBA
answer
C. A company asking the average speed you drive
question
Market competition led to the rise of franchising in the 1950s. The franchiser (the company owning the franchise) gives the franchisee (external entity) the right and all the know-how to sell or give out services of that company using its image, logos, and publicity methods in return for a fixed or variable franchise fee. The success of the franchising system is attributed to the following factors EXCEPT
A- Cost advantage of group affiliation for national advertising and quantity discounts
B- Easy monitoring of quality
C- High incentives for franchisees to maximize sales
D- Decentralization of decision rights to franchisees in running the operation
A- Cost advantage of group affiliation for national advertising and quantity discounts
B- Easy monitoring of quality
C- High incentives for franchisees to maximize sales
D- Decentralization of decision rights to franchisees in running the operation
answer
B. Easy monitoring of quality
question
Something that affects the demand curve that a company can not control?
answer
Uncontrollable Factor
question
What describes the behavior of a group of sellers and tell you how much will be sold at a given price?
answer
Supply Curve
question
The price at which quantity supplied equals quantity demanded?
answer
Market Equillibrium
question
when firms are in long-run equilibrium, economic profit is zero, firms break even, and price equals average costs.
answer
Long-run Equillibrium
question
If an asset is mobile, then in long-run equilibrium, the asset will be indifferent about where it is used; that is, it will make the same profit no matter where it goes.
answer
Indifference Principle
question
A firm that is the single seller in its market, this firm has market power because they produce a product or service without close substitutes, they have no rivals, and barriers to entry prevent other firms from entering the industry.
answer
Monopolies
question
In the long-run, which of the following outcomes is most likely for a firm?
A- Zero accounting profits but positive economic profits.
B- Zero Accounting Profits
C- Positive accounting profits and positive economic profits
D- Zero economic profits but positive accounting profits
A- Zero accounting profits but positive economic profits.
B- Zero Accounting Profits
C- Positive accounting profits and positive economic profits
D- Zero economic profits but positive accounting profits
answer
D. Zero economic profits but positive accounting profits
question
At the individual level, which of the following types of firms faces a downward sloping demand curve?
A- Both a perfectly competitive firm and a monopoly firm
B- Neither a perfectly competitive firm nor a monopoly firm
C- A perfectly competitive firm but not a monopoly firm
D- A monopoly firm but not a perfectly competitive firm
A- Both a perfectly competitive firm and a monopoly firm
B- Neither a perfectly competitive firm nor a monopoly firm
C- A perfectly competitive firm but not a monopoly firm
D- A monopoly firm but not a perfectly competitive firm
answer
D- A monopoly firm but not a perfectly competitive firm
question
Which of the following types of firms are guaranteed to make a positive economic profit?
A- Both a perfectly competitive firm and a monopoly firm
B- Neither a perfectly competitive firm nor a monopoly firm
C- A perfectly competitive firm but not a monopoly firm
D- A monopoly firm but not a perfectly competitive firm
A- Both a perfectly competitive firm and a monopoly firm
B- Neither a perfectly competitive firm nor a monopoly firm
C- A perfectly competitive firm but not a monopoly firm
D- A monopoly firm but not a perfectly competitive firm
answer
B- Neither a perfectly competitive firm nor a monopoly firm
question
What is the main difference between a competitive firm and a monopoly firm?
A- The number of customers served by the firm
B- Monopoly firms are more efficient and therefore have lower costs.
C- Monopoly firms can generally earn positive profits over a longer period of time
D- Monopoly firms enjoy government protection from competition.
A- The number of customers served by the firm
B- Monopoly firms are more efficient and therefore have lower costs.
C- Monopoly firms can generally earn positive profits over a longer period of time
D- Monopoly firms enjoy government protection from competition.
answer
C- Monopoly firms can generally earn positive profits over a longer period of time.
question
Which of the products below is closest to operating in a perfectly competitive industry?
A- Nike Shoes
B- Cotton
C- Perdue Chicken
D- Restaurants
A- Nike Shoes
B- Cotton
C- Perdue Chicken
D- Restaurants
answer
B- Cotton
question
Characterized by three factors
1- firms produce a product or service with very close substitutes meaning demand is very elastic
2- firms have many rivals and no cost advantage over their rivals
3- the industry has no barriers to entry or exit
1- firms produce a product or service with very close substitutes meaning demand is very elastic
2- firms have many rivals and no cost advantage over their rivals
3- the industry has no barriers to entry or exit
answer
Competitive Industry
question
A firm in a perfectly competitive market faces what type of demand curve?
A- Unit elastic
B- Perfectly inelastic
C- Perfectly elastic
D- None of the above
A- Unit elastic
B- Perfectly inelastic
C- Perfectly elastic
D- None of the above
answer
C- perfectly elastic
question
A competitive firm's profit-maximizing price is $15. At MC=MR, the output is 100 units. At this level of production, average total costs are $12. The firm's profits are
A- $300 in the short run and the long run
B- $300 in the short run and $0 in the long run
C- $500 in the short run and the same in the long run
D- $500 in the short run and zero in the long run
A- $300 in the short run and the long run
B- $300 in the short run and $0 in the long run
C- $500 in the short run and the same in the long run
D- $500 in the short run and zero in the long run
answer
B- $300 in the short run and zero in the long run
question
What would happen to revenues if a firm in a perfectly competitive industry raised the prices?
A- they would increase
B- they would increase but profit would decrease
C- they would increase along with profit
D- They would fall to zero
A- they would increase
B- they would increase but profit would decrease
C- they would increase along with profit
D- They would fall to zero
answer
D- They would fall to zero
question
If a firm in a perfectly competitive industry is experiencing average revenues greater than average costs, in the long-run
A- some firms would leave the industry and price will rise
B- some firms will enter the industry and price will rise
C- some firms will leave the industry and price will fall
D- some firms will enter the industry and price will fall
A- some firms would leave the industry and price will rise
B- some firms will enter the industry and price will rise
C- some firms will leave the industry and price will fall
D- some firms will enter the industry and price will fall
answer
D- some firms will enter the industry and price will fall
question
A sudden decrease in the market demand in a competitive industry leads to...
A- losses in the short run and average profits in the long run
B- above-average profits in the short run and average in the long run
C- new firms being attracted to the industry
D- demand creating supply
A- losses in the short run and average profits in the long run
B- above-average profits in the short run and average in the long run
C- new firms being attracted to the industry
D- demand creating supply
answer
A- losses in the short run and average profits in the long run
question
An industry is defined as
answer
a group of firms producing products that are close substitutes
question
Attractive industries have all of the following, except
A- high supplier power
B- low buyer power
C- high entry barriers
D- low rivalry
A- high supplier power
B- low buyer power
C- high entry barriers
D- low rivalry
answer
A- High supplier power
question
Which of the following is NOT an example of an entry barrier?
A- Government protection through patents or licensing requirements
B- strong brands
C- Low capital requirements for entry
D- lower costs driven by economies of scale
A- Government protection through patents or licensing requirements
B- strong brands
C- Low capital requirements for entry
D- lower costs driven by economies of scale
answer
C- low capital requirements for entry
question
Buyers have higher power when
A- their suppliers sell a highly differentiated product
B- they are not a significant purchaser of their supplier's output
C- switching costs are low
D- the buyer industry is highly fragmented (buyers are not concentrated)
A- their suppliers sell a highly differentiated product
B- they are not a significant purchaser of their supplier's output
C- switching costs are low
D- the buyer industry is highly fragmented (buyers are not concentrated)
answer
switching costs are low
question
Which of the following is NOT a factor that contributes to higher rivalry in an industry?
A- Numerous competitors
B- high fixed costs
C- fast industry growth
D- low switching costs for buyers
A- Numerous competitors
B- high fixed costs
C- fast industry growth
D- low switching costs for buyers
answer
C- fast industry growth
question
The concept that describes firms possessing different bundles of resources is
answer
resource heterogeneity
question
If a firm successfully adopts a product differentiation strategy, the elasticity of demand for its products should ______
answer
decrease
question
When a resource or capability is valuable and rare, a firm may gain a ___________
answer
temporary competitive advantage
question
Which of the following is critical for a firm adopting a long-term cost-reduction strategy?
A- the firm must also differentiate its product or service
B- The strategy reduces costs by at least 10%
C- The strategy is focused on reducing internal production costs
D- The methods of achieving cost reductions are difficult to imitate
A- the firm must also differentiate its product or service
B- The strategy reduces costs by at least 10%
C- The strategy is focused on reducing internal production costs
D- The methods of achieving cost reductions are difficult to imitate
answer
D- the methods of achieving cost reductions are difficult to imitate
question
When a resource or capability is valuable, rare, hard to imitate, and nonsubstitutable firms may gain
answer
a sustainable competitive advantage
question
After the massive promotion of Justin Bieber's latest music album, the producers reacted by raising prices for his albums. This implies that promotion expenditures made the album demand
A- more elastic
B- unitary elastic
C-change due to psychological pricing
D- less elastic
A- more elastic
B- unitary elastic
C-change due to psychological pricing
D- less elastic
answer
D- less elastic
question
All of the following choices are examples of promoting a firm's product, except
A- celebrity endorsements
B-pricing
C-discount coupons
D- end-of-aisle displays
A- celebrity endorsements
B-pricing
C-discount coupons
D- end-of-aisle displays
answer
B- Pricing
question
A firm that acquires a substitute product can reduce cannibalization by
A- doing nothing
B- repositioning a product so that it does not directly compete with the substitute
C- setting the same price on both products
D- lowering prices on the low-margin products
A- doing nothing
B- repositioning a product so that it does not directly compete with the substitute
C- setting the same price on both products
D- lowering prices on the low-margin products
answer
B- repositioning a product so that it does not directly compete with the substitute
question
A shoe-producing firm decides to acquire a firm that produces shoe laces. This implies that the firm's aggregate demand
A- less elastic than the individual demand
B-more elastic than the individual demands
C- equally elastic as the individual demands
D- None of the above
A- less elastic than the individual demand
B-more elastic than the individual demands
C- equally elastic as the individual demands
D- None of the above
answer
B- more elastic than the individual demands
question
After firm A producing one good acquired another firm B producing another good, it raised
the prices for the bundle of goods. One can conclude that the goods were
a) substitutes
b) complements
c) not related
d) None of the above
the prices for the bundle of goods. One can conclude that the goods were
a) substitutes
b) complements
c) not related
d) None of the above
answer
A- substitutes
question
Firms tend to raise the price of their goods after acquiring a firm that sells a substitute good because...
answer
D- the bundle has a less elastic demand than individual goods
question
For products like parking lots and hotels, costs of building capacity are mostly fixed or sunk and firms in this industry typically face capacity constraints. Therefore,
A- if SRMR>SRMC at capacity, then the firms should price to fill capacity.
B- if SRMR<SRMC at capacity, then the firms should price to fill capacity.
C- if LRMR>LRMC at capacity, then the firms should price to fill capacity.
D- LRMR<LRMC at capacity, then the firms should price to fill capacity.
A- if SRMR>SRMC at capacity, then the firms should price to fill capacity.
B- if SRMR<SRMC at capacity, then the firms should price to fill capacity.
C- if LRMR>LRMC at capacity, then the firms should price to fill capacity.
D- LRMR<LRMC at capacity, then the firms should price to fill capacity.
answer
A. if SRMR>SRMC at capacity, then the firm should price to fill capacity
question
A firm started advertising its product and this changed the product's elasticity from -2 to -1.5. The firm should
A- raise price from $10 to $15
B- reduce the price from $15 to $10
C- raise the price from $7.50 to $10
D- reduce the price from $10 to $7.50
A- raise price from $10 to $15
B- reduce the price from $15 to $10
C- raise the price from $7.50 to $10
D- reduce the price from $10 to $7.50
answer
A- raise price from $10 to $15
question
On average, if demand is unknown and costs of underpricing are ____ than the costs of overpricing, then ____
answer
Smaller, Under price
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
