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1. (Points: 1)
Which of the following is true when the market is a monopoly?
a. Profits are always positive
b. P > MC
c. P = MR + variable fixed costs
d. All of the above are true for a monopoly
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2. (Points: 1)
You are the manager of a monopoly that faces a straight line demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing price is
a. 150
b. 90
c. 130
d. 110
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3. (Points: 1)
Which of the following is true?
a. A company always produces on the inelastic portion of its demand curve
b. A monopolist always earns an economic profit
c. The more inelastic the demand, the lower the price charged to the customer
d. In the short run a company will shut down operations if the price they charge is less than the average variable cost.
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4. (Points: 1)
A perfectly competitive industry is characterized by all of the following except:
a. There are many buyers and sellers
b. Have unique products that are different than their competitor’s
c. Free entry and exit of companies into the market
d. Have perfect information on the supply and demand sides of the market
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5. (Points: 1)
Which of the following market structures would you expect to yield the greatest variety in the product’s characteristics?
a. Monopoly
b. Monopolistic Competition
c. Subperfect Oligopoly
d. Perfect Competition
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6. (Points: 1)
The primary difference between Monopolistic Competition and Perfect Competition is
a. The ease of entry and exit into the industry
b. The number of firms in the market
c. Firms operating in a perfectly competitive market have identical products
d. None of the statements associated with this question are correct
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7. (Points: 1)
Which of the following industries is best characterized as monopolistically competitive?
a. Toothpaste
b. Crude oil
c. Agricultural commodities
d. Local telephone service
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8. (Points: 1)
Which of the following is an example of monopoly?
a. Shoe industry in the United States
b. Local utility industry in a small town
c. Newspaper industry in New York City
d. Bread industry in New York City
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9. (Points: 1)
Perfectly competitive markets are characterized by:
a. The firms have pricing power
b. The firms are “price takers”
c. Heavy advertizing expenses
d. High short term profits
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10. (Points: 1)
Firms have market or pricing power in:
a. Perfectly competitive markets
b. Monopolistically competitive markets
c. Monopolistic markets
d. Monopolistically competitive markets and monopolistic markets
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11. (Points: 1)
Which of the following statements concerning monopoly is NOT true?
a. A market may be monopolistic because there are some legal or patent barriers
b. A monopoly has market power
c. A monopoly is always undesirable
d. There is some deadweight loss in a monopolistic market
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12. (Points: 1)
The amount of pricing power you have is constrained by the actions of your competitors.
TrueFalse
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13. (Points: 1)
The source(s) of monopoly power for a monopoly may be:
a. Economies of scale
b. Economies of scope
c. Patents
d. All of the statements associated with this question are correct
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14. (Points: 1)
Economies of scale exist whenever:
a. Average total costs decline as output increases
b. Average total costs increase as output increases
c. Average total costs are stationary as output increases
d. Average total costs increase as output increases and average total costs are stationary as output increases
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15. (Points: 1)
Which of the following is not a basic feature of a monopolistically competitive industry?
a. There are many buyers and sellers in the industry
b. Each firm in the industry produces a differentiated product
c. There is free entry and exit into the industry
d. Each firm owns a patent on its product
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16. (Points: 1)
Chris finds it is profitable to raise cows and produce meat, cheese and milk because he enjoys:
a. Economies of scale
b. Economies of scope
c. Working outside in the sun
d. None of the statements associated with this question are correct
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17. (Points: 1)
Studying perfectly competitive markets is a waste of time because no perfectly competitive markets exist.
TrueFalse
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18. (Points: 1)
The market supply curve is the summation of each individual firm’s supply at each price.
TrueFalse
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19. (Points: 1)
Studying perfectly competitive markets is useful because:
a. Many small firms are price takers
b. Identifies the importance of product differentiation in increasing profits
c. Both statements A & B are correct
d. None of the statements associated with this question are correct
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20. (Points: 1)
What will likely happen to the demand for and price of the patent-holder's product when the patent runs out?
a. Demand and price will increase
b. Demand will decline
c. Nothing
d. New companies will enter the market and increase the price for the product
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21. (Points: 1)
What will happen after the patent on a drug expires?
a. The patent holder will leave the market
b. The patent holder will retain its status as a monopoly but produce at a lower price
c. Some firms that produce generic drugs will enter the market
d. None of the statements associated with this question are correct
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22. (Points: 1)
If firms are price takers but there are significant barriers to entry – higher profits probably will exist.
TrueFalse
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23. (Points: 1)
Which of the following statements is not correct about monopoly?
a. A monopolist generally faces a downward sloping demand curve
b. Monopolists always make positive profits in the long-run
c. A monopoly may make negative profits in the short-run
d. There is no close substitute for a monopoly's product
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24. (Points: 1)
Differentiated goods are not a feature of a
a. Perfectly competitive market
b. Monopolistically competitive market
c. Monopolistic market
d. Perfectly competitive market and monopolistic market
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25. (Points: 1)
One of the sources of monopoly power for a monopoly may be
a. Diseconomies of scale
b. Differentiated products
c. Patents
d. Free entry and exit
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26. (Points: 1)
In the long-run, monopolistically competitive firms can charge prices
a. Equal to marginal cost
b. Below marginal cost
c. Equal to the minimum of average total cost
d. Above their minimum of average total cost
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27. (Points: 1)
Which of the following is a strategy(ies) used by firms in monopolistically competitive industries to convince consumers that their product is better than its rivals' products?
a. Comparative advertising
b. Low price marketing
c. Equity marketing
d. Company wide internal programs
Save Answer
28. (Points: 1)
Most pricing theories assumes rivals will
a. Keep their output and prices constant
b. Increase their output whenever a firm increases its output
c. Decrease output whenever a firm increases its output
d. Follow the learning curve
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29. (Points: 1)
Practical applications dictate when a firm's marginal cost decreases substantially versus their competitor’s, generally the firm:
a. Reduces output and charges a higher price
b. Increases output and charges a lower price
c. Higher output and a higher price
d. None of the statements associated with this question are true
Save Answer
30. (Points: 1)
Generally, substantially higher profitability in an industry encourages new firms to enter the industry.
TrueFalse
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31. (Points: 1)
Monopoly power allows to sell any quantity of product that you want to sell at any price you specify.
TrueFalse
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32. (Points: 1)
"Tom and Jack are the only two local gas stations in town. Although they have different marginal costs, they both survive continued competition." Tom and Jack’s market does constitute a(n):
a. Real life example
b. Oligopoly
c. Monopoly
d. Perfect Competition
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33. (Points: 1)
A market is not contestable if:
a. All producers have access to the same technology
b. Consumers respond quickly to a price change
c. Existing firms cannot respond quickly to entry by lowering their price
d. Consumers are insensitive to changes in price
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34. (Points: 1)
If firms compete in a market that is not perfectly competitive, then each firm views the
a. Output of the rival as given
b. Prices of rival firms products potentially will respond to changes made by the firm
c. Profits of rivals as given
d. All of the statements associated with this question are correct
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35. (Points: 1)
An oligopolistic market contains relatively few large firms.
TrueFalse
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36. (Points: 1)
An oligopolistic market is easier to manage because competitors will react to price changes by the firm.
TrueFalse
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37. (Points: 1)
Collusion in oligopoly is difficult to achieve because:
a. It is prohibited by law
b. Every firm has an incentive to cheat given that others follow the agreement
c. Firms usually take care of consumers' interests as a decision priority
d. It is prohibited by law and every firm has an incentive to cheat given that others follow the agreement
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38. (Points: 1)
Which of the following is not a type of market structure?
a. Monopolistic competition
b. Perfect competition
c. Monopolistic oligopoly
d. Monopoly
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39. (Points: 1)
Which of the following is true:
a. Prices have a tendency to remain in a narrow band because competitors will react to each other’s actions
b. If there is only one firm in a market, prices must be above marginal cost and the total consumer surplus is captured
c. All firms in monopolistic competitive markets make a profit of some time
d. None of the statements associated with this question are correct
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40. (Points: 1)
Which of the following is true?
a. New products provide the best opportunities to utilize pricing theories
b. Prices are constrained because competitors will react to the changes introduced by others
c. Brand loyalty is important if you desire to charge a higher price for your differentiated product
d. All of the statements associated with this question are correct
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41. (Points: 1)
In the presence of large sunk costs in physical plants due to the nature of the product, which of the following market structures generally is in effect?
a. Perfect Competition
b. Oligopoly
c. Bertrand Quasi Perfect Market
d. Monopoly
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42. (Points: 1)
Which of the following is a feature of a contestable market?
a. Low barriers to entry
b. Consumers are sensitive to changes in price
c. Existing firms have no pricing power
d. All of the statements associated with this question are correct
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43. (Points: 1)
Price matching by promising to match any lower competitor’s advertised price for a period of time provides security for the customer in believing they have the lowest cost possible at little or no cost for the firm.
TrueFalse
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44. (Points: 1)
Setting prices by shopping the competition and using the lowest price found is useful when you have better margins or have high volume sales so any one item will not significantly impact your total profits.
TrueFalse
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45. (Points: 1)
Which of the following is true about brand loyalty?
a. The lower the percentage of a person’s income is spent on the product-the easier it is to break loyalty
b. The higher the perceived value and cost of the product, coupons become extremely important in maintaining loyalty
c. Advertising is very important in educating and retaining customers
d. Market structure has an important impact on loyalty
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46. (Points: 1)
Your business strategy is one of the key determinates of your pricing policy.
TrueFalse
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47. (Points: 1)
The prices charged by the firm are affected by which of the following?
a. Process technologies employed
b. Desirability of the product to the customer
c. Business strategies and cost structure of the competition
d. All the statements associated with this question are correct
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48. (Points: 1)
What is true about oligopolistic markets
a. Oligopolistic markets are the basic type of competition faced
b. Products usually are commodities with little differentiation
c. Oligopoly is the most complicated type of market structure
d. Both a and c
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49. (Points: 1)
A decrease in a firm's marginal cost will cause
a. Competitors to duplicate their processes
b. The firm to want to increase output at a slightly lower price
c. Competing firms to increase their output
d. The firm to reduce output because they are already satisfied with their profits
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50. (Points: 1)
Which of the following is true for perfect competition but not true for monopolistic competition and a monopoly?
a. MC = MR
b. P = MC
c. Positive long run profits
d. P = MC and positive long run profits
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51. (Points: 1)
A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs. It faces a straight line inverse demand function given by P = 50 - Q. Which of the following is the marginal revenue function for the firm?
a. MR = 60 - 2Q
b. MR = 50 - Q
c. MR = 100 - Q
d. MR = 50 - 2Q
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52. (Points: 1)
Which of the following is not a condition for a firm to engage in price discrimination?
a. Consumers are partitioned into two or more types, with one type having a more elastic demand than the other
b. The firm has a means of identifying consumer types
c. The consumers are assured to be sincere in telling their true natures
d. There is no resale market for the good
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53. (Points: 1)
Great Escape Theatres give senior citizens discounts. What is the possible privately motivated purpose for them to do so?
a. The owners are benevolent and feel sorry for senior citizens
b. Senior citizens have a more elastic demand for movies than ordinary citizens
c. Senior citizens lack recreational activities
d. None of the statements associated with this question are correct
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54. (Points: 1)
Which of the following pricing strategies does not usually enhance the profits of firms with market power?
a. Price matching
b. Price discrimination
c. Two-part pricing
d. Marginal cost pricing
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55. (Points: 1)
Which of the following statements is true?
a. The more elastic the demand, the higher is the profit-maximizing markup
b. The more elastic the demand, the lower is the profit-maximizing markup
c. The higher the marginal cost, the lower the profit-maximizing price
d. The higher the average cost, the lower the profit-maximizing price
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56. (Points: 1)
The idea of charging two different groups of consumers two different prices is practiced in:
a. Price discrimination
b. Two-part pricing
c. Price matching
d. None of the statements associated with this question are correct
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57. (Points: 1)
One of the conditions under which price discrimination is profitable is:
a. Ability to identify consumer types
b. Inability to resell the good
c. Differences in demand elasticities
d. All of the statements associated with this question are correct
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58. (Points: 1)
A local video store estimates their average customer's demand per year is Q = 7 - 2P, and knows the marginal cost of each rental is $0.5. How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal two-part pricing strategy?
a. $9
b. $10
c. $11
d. $12
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59. (Points: 1)
A Broadway theater sells weekday show tickets at a lower price than for a weekend show. This is an example of:
a. Student discounts
b. Parking problems downtown during the day
c. Price discrimination or peak-load pricing
d. None of the statements associated with this question are correct
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60. (Points: 1)
The special cost structure that is necessary for a firm to adopt a peak-load pricing policy is?
a. Economies of scale
b. Economies of scope
c. Constant marginal cost
d. Limited capacity
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61. (Points: 1)
Snowpeak Ski Resort offers a price for a lift ticket that is barely over its marginal cost, but the high equipment rental fee keeps generating big profits. Which pricing strategy is the management using?
a. Price discrimination
b. Two-part pricing
c. Commodity bundling
d. Cross subsidization
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62. (Points: 1)
Perfect price discrimination is dependent on the capability of the salespeople in understanding the customers motivation to buy the product in order to extract as much of the consumer surplus as possible.
TrueFalse
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63. (Points: 1)
Price matching strategies may fail to enhance profits when:
a. Firms have high levels of inventory on hand
b. The firms have loeer marginal costs
c. Firms have higher operating costs and lower margins
d. None of the statements associated with this question are correct
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64. (Points: 1)
A price matching strategy requires that the firms monitor their rival's prices.
TrueFalse
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65. (Points: 1)
Which of the following pricing policies compensate customers if the firm fails to provide the best price in the market?
a. Price matching
b. Beat-or-pay
c. Brand loyalty
d. Randomized pricing
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66. (Points: 1)
Which group of policies aims at discouraging rivals to enter a price war?
a. Price matching, beat-or-pay, and randomized pricing
b. Price matching, brand loyalty, and commodity bundling
c. Randomized pricing, price discrimination, and cross subsidization
d. Load-peak pricing, two-part pricing, and price matching
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67. (Points: 1)
Randomized pricing is practical because it places pressure on competitors and they make mistakes because they confused about what you will do next.
TrueFalse
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68. (Points: 1)
Brand loyalty can be enhanced through:
a. An advertising campaign
b. A price war
c. Neither an advertising campaign nor a price war
d. An advertising campaign and a price war
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69. (Points: 1)
If a product is perceived by consumers as homogeneous, which of the following strategies will work to induce brand loyalty?
a. Intensive advertising campaign
b. Price wars with competitors
c. Frequent buyer rebate programs
d. None of the statements associated with this question are correct
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70. (Points: 1)
Frequent flyer programs are useful in developing customer loyalty.
TrueFalse
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71. (Points: 1)
Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat, and $50 for pants. Consumers of type B will pay $75 for a coat, and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm can identify each consumer type and can price discriminate, what is the optimal price for a pair of pants?
a. Charge both types $150
b. Charge both types $75
c. Charge type A consumers $50, and type B consumers $75
d. Charge type A consumers $50, and type B consumers $50
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72. (Points: 1)
The average consumer at a firm with market power has an inverse demand function of P = 10 - Q. The firm's cost function is C = 2Q. If the firm engages in two part pricing, what is the optimal fixed fee to charge each consumer?
a. $2
b. $32
c. $64
d. None of the statements associated with this question are correct
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73. (Points: 1)
Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat, and $50 for pants. Consumers of type B will pay $75 for a coat, and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm charges $75 for pants and $75 for a coat, the firm will sell a coat to:
a. Type A consumers
b. Type B consumers
c. Type A consumers and type B consumers
d. None of the statements associated with this question are correct
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74. (Points: 1)
Suppose two types of consumers are buying clothes. Consumers of type A will pay $100 for a sweater, and $50 for a shirt. Consumers of type B will pay $75 for a sweater, and $75 for a shirt. The firm faces no competition and has a marginal cost of zero. The optimal commodity bundling strategy is:
a. Charge $150 for both items
b. Charge $75 for both items
c. Charge $100 for both items
d. Charge $125 for both items
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75. (Points: 1)
Interdivisional transfer pricing of products should focus on what is the profit maximizing price for the first plant so it can be profitable.
TrueFalse
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76. (Points: 1)
First-degree price discrimination
a. Occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased
b. Results in the firm extracting all surplus from consumers
c. Occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers
d. None of the statements associated with this question are correct
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77. (Points: 1)
Second-degree price discrimination
a. Is the practice of posting a discrete schedule of declining prices for different ranges of quantities
b. Eliminates the problem of double marginalization
c. Results in transfer pricing
d. None of the statements associated with this question are correct
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78. (Points: 1)
Which of the following is a correct statement?
a. The lower the marginal cost, the higher the profit-maximizing price
b. The lower the average cost, the higher the profit-maximizing price
c. The more inelastic the demand, the higher is the profit-maximizing markup
d. The more elastic the demand, the higher is the profit-maximizing markup
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79. (Points: 1)
To avoid the problem of double marginalization
a. Transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division
b. Firms should put more emphasis on vertical integration
c. Firms should engage in two-part pricing
d. Firms should engage in commodity bundling, unless it is possible to engage in either first or second degree price discrimination
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80. (Points: 1)
Suppose you are an analyst for the Coca-Cola Company. An individuals' inverse demand for Coca-Cola is estimated to be P = 98 - 4Q (in cents). If Coca-Cola is produced according to the following cost function C(Q) = 1,000 + 2Q (in cents), compute the optimal price and the number of cans to sell as a single package.
a. $1200 per package and 12 cans
b. $12 per package and 24 cans
1. (Points: 1)
Which of the following is true when the market is a monopoly?
a. Profits are always positive
b. P > MC
c. P = MR + variable fixed costs
d. All of the above are true for a monopoly
Save Answer
2. (Points: 1)
You are the manager of a monopoly that faces a straight line demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing price is
a. 150
b. 90
c. 130
d. 110
Save Answer
3. (Points: 1)
Which of the following is true?
a. A company always produces on the inelastic portion of its demand curve
b. A monopolist always earns an economic profit
c. The more inelastic the demand, the lower the price charged to the customer
d. In the short run a company will shut down operations if the price they charge is less than the average variable cost.
Save Answer
4. (Points: 1)
A perfectly competitive industry is characterized by all of the following except:
a. There are many buyers and sellers
b. Have unique products that are different than their competitor’s
c. Free entry and exit of companies into the market
d. Have perfect information on the supply and demand sides of the market
Save Answer
5. (Points: 1)
Which of the following market structures would you expect to yield the greatest variety in the product’s characteristics?
a. Monopoly
b. Monopolistic Competition
c. Subperfect Oligopoly
d. Perfect Competition
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6. (Points: 1)
The primary difference between Monopolistic Competition and Perfect Competition is
a. The ease of entry and exit into the industry
b. The number of firms in the market
c. Firms operating in a perfectly competitive market have identical products
d. None of the statements associated with this question are correct
Save Answer
7. (Points: 1)
Which of the following industries is best characterized as monopolistically competitive?
a. Toothpaste
b. Crude oil
c. Agricultural commodities
d. Local telephone service
Save Answer
8. (Points: 1)
Which of the following is an example of monopoly?
a. Shoe industry in the United States
b. Local utility industry in a small town
c. Newspaper industry in New York City
d. Bread industry in New York City
Save Answer
9. (Points: 1)
Perfectly competitive markets are characterized by:
a. The firms have pricing power
b. The firms are “price takers”
c. Heavy advertizing expenses
d. High short term profits
Save Answer
10. (Points: 1)
Firms have market or pricing power in:
a. Perfectly competitive markets
b. Monopolistically competitive markets
c. Monopolistic markets
d. Monopolistically competitive markets and monopolistic markets
Save Answer
11. (Points: 1)
Which of the following statements concerning monopoly is NOT true?
a. A market may be monopolistic because there are some legal or patent barriers
b. A monopoly has market power
c. A monopoly is always undesirable
d. There is some deadweight loss in a monopolistic market
Save Answer
12. (Points: 1)
The amount of pricing power you have is constrained by the actions of your competitors.
TrueFalse
Save Answer
13. (Points: 1)
The source(s) of monopoly power for a monopoly may be:
a. Economies of scale
b. Economies of scope
c. Patents
d. All of the statements associated with this question are correct
Save Answer
14. (Points: 1)
Economies of scale exist whenever:
a. Average total costs decline as output increases
b. Average total costs increase as output increases
c. Average total costs are stationary as output increases
d. Average total costs increase as output increases and average total costs are stationary as output increases
Save Answer
15. (Points: 1)
Which of the following is not a basic feature of a monopolistically competitive industry?
a. There are many buyers and sellers in the industry
b. Each firm in the industry produces a differentiated product
c. There is free entry and exit into the industry
d. Each firm owns a patent on its product
Save Answer
16. (Points: 1)
Chris finds it is profitable to raise cows and produce meat, cheese and milk because he enjoys:
a. Economies of scale
b. Economies of scope
c. Working outside in the sun
d. None of the statements associated with this question are correct
Save Answer
17. (Points: 1)
Studying perfectly competitive markets is a waste of time because no perfectly competitive markets exist.
TrueFalse
Save Answer
18. (Points: 1)
The market supply curve is the summation of each individual firm’s supply at each price.
TrueFalse
Save Answer
19. (Points: 1)
Studying perfectly competitive markets is useful because:
a. Many small firms are price takers
b. Identifies the importance of product differentiation in increasing profits
c. Both statements A & B are correct
d. None of the statements associated with this question are correct
Save Answer
20. (Points: 1)
What will likely happen to the demand for and price of the patent-holder's product when the patent runs out?
a. Demand and price will increase
b. Demand will decline
c. Nothing
d. New companies will enter the market and increase the price for the product
Save Answer
21. (Points: 1)
What will happen after the patent on a drug expires?
a. The patent holder will leave the market
b. The patent holder will retain its status as a monopoly but produce at a lower price
c. Some firms that produce generic drugs will enter the market
d. None of the statements associated with this question are correct
Save Answer
22. (Points: 1)
If firms are price takers but there are significant barriers to entry – higher profits probably will exist.
TrueFalse
Save Answer
23. (Points: 1)
Which of the following statements is not correct about monopoly?
a. A monopolist generally faces a downward sloping demand curve
b. Monopolists always make positive profits in the long-run
c. A monopoly may make negative profits in the short-run
d. There is no close substitute for a monopoly's product
Save Answer
24. (Points: 1)
Differentiated goods are not a feature of a
a. Perfectly competitive market
b. Monopolistically competitive market
c. Monopolistic market
d. Perfectly competitive market and monopolistic market
Save Answer
25. (Points: 1)
One of the sources of monopoly power for a monopoly may be
a. Diseconomies of scale
b. Differentiated products
c. Patents
d. Free entry and exit
Save Answer
26. (Points: 1)
In the long-run, monopolistically competitive firms can charge prices
a. Equal to marginal cost
b. Below marginal cost
c. Equal to the minimum of average total cost
d. Above their minimum of average total cost
Save Answer
27. (Points: 1)
Which of the following is a strategy(ies) used by firms in monopolistically competitive industries to convince consumers that their product is better than its rivals' products?
a. Comparative advertising
b. Low price marketing
c. Equity marketing
d. Company wide internal programs
Save Answer
28. (Points: 1)
Most pricing theories assumes rivals will
a. Keep their output and prices constant
b. Increase their output whenever a firm increases its output
c. Decrease output whenever a firm increases its output
d. Follow the learning curve
Save Answer
29. (Points: 1)
Practical applications dictate when a firm's marginal cost decreases substantially versus their competitor’s, generally the firm:
a. Reduces output and charges a higher price
b. Increases output and charges a lower price
c. Higher output and a higher price
d. None of the statements associated with this question are true
Save Answer
30. (Points: 1)
Generally, substantially higher profitability in an industry encourages new firms to enter the industry.
TrueFalse
Save Answer
31. (Points: 1)
Monopoly power allows to sell any quantity of product that you want to sell at any price you specify.
TrueFalse
Save Answer
32. (Points: 1)
"Tom and Jack are the only two local gas stations in town. Although they have different marginal costs, they both survive continued competition." Tom and Jack’s market does constitute a(n):
a. Real life example
b. Oligopoly
c. Monopoly
d. Perfect Competition
Save Answer
33. (Points: 1)
A market is not contestable if:
a. All producers have access to the same technology
b. Consumers respond quickly to a price change
c. Existing firms cannot respond quickly to entry by lowering their price
d. Consumers are insensitive to changes in price
Save Answer
34. (Points: 1)
If firms compete in a market that is not perfectly competitive, then each firm views the
a. Output of the rival as given
b. Prices of rival firms products potentially will respond to changes made by the firm
c. Profits of rivals as given
d. All of the statements associated with this question are correct
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35. (Points: 1)
An oligopolistic market contains relatively few large firms.
TrueFalse
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36. (Points: 1)
An oligopolistic market is easier to manage because competitors will react to price changes by the firm.
TrueFalse
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37. (Points: 1)
Collusion in oligopoly is difficult to achieve because:
a. It is prohibited by law
b. Every firm has an incentive to cheat given that others follow the agreement
c. Firms usually take care of consumers' interests as a decision priority
d. It is prohibited by law and every firm has an incentive to cheat given that others follow the agreement
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38. (Points: 1)
Which of the following is not a type of market structure?
a. Monopolistic competition
b. Perfect competition
c. Monopolistic oligopoly
d. Monopoly
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39. (Points: 1)
Which of the following is true:
a. Prices have a tendency to remain in a narrow band because competitors will react to each other’s actions
b. If there is only one firm in a market, prices must be above marginal cost and the total consumer surplus is captured
c. All firms in monopolistic competitive markets make a profit of some time
d. None of the statements associated with this question are correct
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40. (Points: 1)
Which of the following is true?
a. New products provide the best opportunities to utilize pricing theories
b. Prices are constrained because competitors will react to the changes introduced by others
c. Brand loyalty is important if you desire to charge a higher price for your differentiated product
d. All of the statements associated with this question are correct
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41. (Points: 1)
In the presence of large sunk costs in physical plants due to the nature of the product, which of the following market structures generally is in effect?
a. Perfect Competition
b. Oligopoly
c. Bertrand Quasi Perfect Market
d. Monopoly
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42. (Points: 1)
Which of the following is a feature of a contestable market?
a. Low barriers to entry
b. Consumers are sensitive to changes in price
c. Existing firms have no pricing power
d. All of the statements associated with this question are correct
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43. (Points: 1)
Price matching by promising to match any lower competitor’s advertised price for a period of time provides security for the customer in believing they have the lowest cost possible at little or no cost for the firm.
TrueFalse
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44. (Points: 1)
Setting prices by shopping the competition and using the lowest price found is useful when you have better margins or have high volume sales so any one item will not significantly impact your total profits.
TrueFalse
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45. (Points: 1)
Which of the following is true about brand loyalty?
a. The lower the percentage of a person’s income is spent on the product-the easier it is to break loyalty
b. The higher the perceived value and cost of the product, coupons become extremely important in maintaining loyalty
c. Advertising is very important in educating and retaining customers
d. Market structure has an important impact on loyalty
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46. (Points: 1)
Your business strategy is one of the key determinates of your pricing policy.
TrueFalse
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47. (Points: 1)
The prices charged by the firm are affected by which of the following?
a. Process technologies employed
b. Desirability of the product to the customer
c. Business strategies and cost structure of the competition
d. All the statements associated with this question are correct
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48. (Points: 1)
What is true about oligopolistic markets
a. Oligopolistic markets are the basic type of competition faced
b. Products usually are commodities with little differentiation
c. Oligopoly is the most complicated type of market structure
d. Both a and c
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49. (Points: 1)
A decrease in a firm's marginal cost will cause
a. Competitors to duplicate their processes
b. The firm to want to increase output at a slightly lower price
c. Competing firms to increase their output
d. The firm to reduce output because they are already satisfied with their profits
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50. (Points: 1)
Which of the following is true for perfect competition but not true for monopolistic competition and a monopoly?
a. MC = MR
b. P = MC
c. Positive long run profits
d. P = MC and positive long run profits
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51. (Points: 1)
A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs. It faces a straight line inverse demand function given by P = 50 - Q. Which of the following is the marginal revenue function for the firm?
a. MR = 60 - 2Q
b. MR = 50 - Q
c. MR = 100 - Q
d. MR = 50 - 2Q
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52. (Points: 1)
Which of the following is not a condition for a firm to engage in price discrimination?
a. Consumers are partitioned into two or more types, with one type having a more elastic demand than the other
b. The firm has a means of identifying consumer types
c. The consumers are assured to be sincere in telling their true natures
d. There is no resale market for the good
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53. (Points: 1)
Great Escape Theatres give senior citizens discounts. What is the possible privately motivated purpose for them to do so?
a. The owners are benevolent and feel sorry for senior citizens
b. Senior citizens have a more elastic demand for movies than ordinary citizens
c. Senior citizens lack recreational activities
d. None of the statements associated with this question are correct
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54. (Points: 1)
Which of the following pricing strategies does not usually enhance the profits of firms with market power?
a. Price matching
b. Price discrimination
c. Two-part pricing
d. Marginal cost pricing
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55. (Points: 1)
Which of the following statements is true?
a. The more elastic the demand, the higher is the profit-maximizing markup
b. The more elastic the demand, the lower is the profit-maximizing markup
c. The higher the marginal cost, the lower the profit-maximizing price
d. The higher the average cost, the lower the profit-maximizing price
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56. (Points: 1)
The idea of charging two different groups of consumers two different prices is practiced in:
a. Price discrimination
b. Two-part pricing
c. Price matching
d. None of the statements associated with this question are correct
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57. (Points: 1)
One of the conditions under which price discrimination is profitable is:
a. Ability to identify consumer types
b. Inability to resell the good
c. Differences in demand elasticities
d. All of the statements associated with this question are correct
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58. (Points: 1)
A local video store estimates their average customer's demand per year is Q = 7 - 2P, and knows the marginal cost of each rental is $0.5. How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal two-part pricing strategy?
a. $9
b. $10
c. $11
d. $12
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59. (Points: 1)
A Broadway theater sells weekday show tickets at a lower price than for a weekend show. This is an example of:
a. Student discounts
b. Parking problems downtown during the day
c. Price discrimination or peak-load pricing
d. None of the statements associated with this question are correct
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60. (Points: 1)
The special cost structure that is necessary for a firm to adopt a peak-load pricing policy is?
a. Economies of scale
b. Economies of scope
c. Constant marginal cost
d. Limited capacity
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61. (Points: 1)
Snowpeak Ski Resort offers a price for a lift ticket that is barely over its marginal cost, but the high equipment rental fee keeps generating big profits. Which pricing strategy is the management using?
a. Price discrimination
b. Two-part pricing
c. Commodity bundling
d. Cross subsidization
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62. (Points: 1)
Perfect price discrimination is dependent on the capability of the salespeople in understanding the customers motivation to buy the product in order to extract as much of the consumer surplus as possible.
TrueFalse
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63. (Points: 1)
Price matching strategies may fail to enhance profits when:
a. Firms have high levels of inventory on hand
b. The firms have loeer marginal costs
c. Firms have higher operating costs and lower margins
d. None of the statements associated with this question are correct
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64. (Points: 1)
A price matching strategy requires that the firms monitor their rival's prices.
TrueFalse
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65. (Points: 1)
Which of the following pricing policies compensate customers if the firm fails to provide the best price in the market?
a. Price matching
b. Beat-or-pay
c. Brand loyalty
d. Randomized pricing
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66. (Points: 1)
Which group of policies aims at discouraging rivals to enter a price war?
a. Price matching, beat-or-pay, and randomized pricing
b. Price matching, brand loyalty, and commodity bundling
c. Randomized pricing, price discrimination, and cross subsidization
d. Load-peak pricing, two-part pricing, and price matching
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67. (Points: 1)
Randomized pricing is practical because it places pressure on competitors and they make mistakes because they confused about what you will do next.
TrueFalse
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68. (Points: 1)
Brand loyalty can be enhanced through:
a. An advertising campaign
b. A price war
c. Neither an advertising campaign nor a price war
d. An advertising campaign and a price war
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69. (Points: 1)
If a product is perceived by consumers as homogeneous, which of the following strategies will work to induce brand loyalty?
a. Intensive advertising campaign
b. Price wars with competitors
c. Frequent buyer rebate programs
d. None of the statements associated with this question are correct
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70. (Points: 1)
Frequent flyer programs are useful in developing customer loyalty.
TrueFalse
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71. (Points: 1)
Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat, and $50 for pants. Consumers of type B will pay $75 for a coat, and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm can identify each consumer type and can price discriminate, what is the optimal price for a pair of pants?
a. Charge both types $150
b. Charge both types $75
c. Charge type A consumers $50, and type B consumers $75
d. Charge type A consumers $50, and type B consumers $50
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72. (Points: 1)
The average consumer at a firm with market power has an inverse demand function of P = 10 - Q. The firm's cost function is C = 2Q. If the firm engages in two part pricing, what is the optimal fixed fee to charge each consumer?
a. $2
b. $32
c. $64
d. None of the statements associated with this question are correct
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73. (Points: 1)
Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat, and $50 for pants. Consumers of type B will pay $75 for a coat, and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm charges $75 for pants and $75 for a coat, the firm will sell a coat to:
a. Type A consumers
b. Type B consumers
c. Type A consumers and type B consumers
d. None of the statements associated with this question are correct
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74. (Points: 1)
Suppose two types of consumers are buying clothes. Consumers of type A will pay $100 for a sweater, and $50 for a shirt. Consumers of type B will pay $75 for a sweater, and $75 for a shirt. The firm faces no competition and has a marginal cost of zero. The optimal commodity bundling strategy is:
a. Charge $150 for both items
b. Charge $75 for both items
c. Charge $100 for both items
d. Charge $125 for both items
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75. (Points: 1)
Interdivisional transfer pricing of products should focus on what is the profit maximizing price for the first plant so it can be profitable.
TrueFalse
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76. (Points: 1)
First-degree price discrimination
a. Occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased
b. Results in the firm extracting all surplus from consumers
c. Occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers
d. None of the statements associated with this question are correct
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77. (Points: 1)
Second-degree price discrimination
a. Is the practice of posting a discrete schedule of declining prices for different ranges of quantities
b. Eliminates the problem of double marginalization
c. Results in transfer pricing
d. None of the statements associated with this question are correct
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78. (Points: 1)
Which of the following is a correct statement?
a. The lower the marginal cost, the higher the profit-maximizing price
b. The lower the average cost, the higher the profit-maximizing price
c. The more inelastic the demand, the higher is the profit-maximizing markup
d. The more elastic the demand, the higher is the profit-maximizing markup
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79. (Points: 1)
To avoid the problem of double marginalization
a. Transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division
b. Firms should put more emphasis on vertical integration
c. Firms should engage in two-part pricing
d. Firms should engage in commodity bundling, unless it is possible to engage in either first or second degree price discrimination
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80. (Points: 1)
Suppose you are an analyst for the Coca-Cola Company. An individuals' inverse demand for Coca-Cola is estimated to be P = 98 - 4Q (in cents). If Coca-Cola is produced according to the following cost function C(Q) = 1,000 + 2Q (in cents), compute the optimal price and the number of cans to sell as a single package.
a. $1200 per package and 12 cans
b. $12 per package and 24 cans
c. $11.52 per package and 12 cans
d. $15 per package and 16.67 cans
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c. $11.52 per package and 12 cans
d. $15 per package and 16.67 cans
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