BEC MCQ 5.3

Question 1

Which one is not a key assumption in a perfect competition

Answer 1

Customers are indifferent about which firm they buy from
The level of firms output is small relative to industry’s total output
There is a freedom of entry into and exit

Question 2

in order to sell at the market controlled by monopolists

Answer 2

Marginal Revenue equals marginal cost

Question 3

Natural monopoly

Answer 3

When economic and technical conditions permit only one efficient supplier

Question 4

entry barrier

created barrier

Answer 4

large capital are basic example for barriers to entry. A barrier to entry effectively permits firms from entering the market to compete against firms
created barrier is the barrier made by firms already int he industry

Question 5

Minimum efficiency scale

Answer 5

is the output level where long run average costs are minimized

Question 6

Charecteristics of monopolistic competition include

Answer 6

numerous firm with differentiated products…
Ease of entry
firms exact some influence over price and market
non price competition is frequent and critical. Ex-Brand name consumer products

Question 7

Perfect compotition
oligopoly
Monopoly

Answer 7

no obstacles
significant obstacles-kinked demand curves-differentiated products
One company will be monopoly two will be oligopoly

Question 8

Whether the markets are perfectly competitive or imperfectly competitive

Answer 8

marginal costs equal marginal revenue

Question 9

Strategic Plans

Answer 9

various level organizations will implement strategic plans differently
continual revaluation and revision for strategic plans is necessary
strategic plan will vary by segment
Under pure competition strategic plan focus -maintaining the market share and responsiveness of sales price to market conditions
under monopolistic competition-strategic plans include maintaining market share, but they also likely include plans for enhanced product differentiation, and allocation to advertising product research etc

Question 10

Elasticity of demand or supply

Answer 10

is a measure of how sensitive the demand or the supply of product is to a change in its price

Question 11

What if a demand for a product is price unit elastic

Answer 11

change in price will not have effect in total revenue

Question 12

A price floor

Answer 12

A price ceiling is a price that is established above the equilibrium price which causes a surplus to develop
Price floor na above

Question 13

Price ceiling

Answer 13

is a price that is established below the equilibrium price, which causes a shortage to develop. Price ceiling naa below

Question 14

Value chain analysis

Answer 14

must be used in conjunction with the strategic plan of the organization. The value chain starts with the firm and goes all through the way to the end users of the product. Value chain analysis is critical to assessing the competitive advantage of the firm

Question 15

Different type of value chain analysis

Answer 15

Internal Differentiation analysis-The firm may analyze its ability to create value through differentiation. when the customer thinks the firms products are superior to that of rivals
Internal costs analysis- In order to determine the internal value creating ability on the firm the sources of profit and costs of the internal activities of the firm must be analyzed.
analyzing the vertical linkage of the firm, means, understanding the activities, of the suppliers and buyers of the product and determining where value can be created to the firms operations.

Question 16

micheal porters five forcast that affect the competitive environment

Answer 16

The threat of entry
Power of buyers
Power of suppliers
Threat of substitutes
Competitive rivalry

Question 17

Reasons that competition becomes even stronger

Answer 17

The market is not growing fast
There are several equal size firms in the market
Customers do not have brand preferences
Costs of exiting the market exceed the costs of continuing to operate
Some firms profit from making certain moves to increase market share
the various firms in the market uses different types of strategic plans

Question 18

Two types of cost advantages

Answer 18

competitive advantage and differential advantage

Question 19

Cost leadership strategies is developed by Michael porter will work well if

Answer 19

buyers have large amount of bargaining power in the market
New entry firms are able to influence buyers to switch their products by cutting their price of their product for a period of time in an effort to gain market share and increase profits
heavy price competition exists in the market

Question 20

Principles of substitution

Answer 20

Principles of substitution states that people tend to shift their buying from relatively expensive to relatively cheap goods. Thus, if the price of the product falls people tend to buy more of it and less of other expensive products

Question 21

Economies of scale

Answer 21

In the long run firms may experience increasing returns due to economies of scale which come into a full play if large number of units are produced.

Question 22

Law of diminishing returns

Answer 22

Increase in labour or capital beyond a point will not give proportional returns

Question 23

comparative advantage

Answer 23

That if even one of two regions is absolutely more efficient in production of every good than is the other if each region specializes in products trade will be mutually profitable

Question 24

In microecomics the distingsuihing character on the supply side is that

Answer 24

All inputs are variable

Question 25

A shift left in demand curve

Answer 25

represents a decrease in demand ( at all levels) for that product.

Question 26

A increase in supply

Answer 26

Increase in the quantity of beef demanded

Question 27

When the supply and demand for a good both increase

Answer 27

EQUILLIBRIUM PRICE MAY INCREASE DECREASE OR REMAIN UNCHANGED

Question 28

The price elasticity of demand

Answer 28

% change in demand/% change in price. Price elasticity of demand is defined as the percentage change in quantity demanded resulting from one percent change in price.
q2-q1
---------
q1
-------------
p2-p1
---------
p1

Question 29

Inferiror good

Answer 29

Inferior good is the one where demand declines as income increases

Question 30

Price elasticity of supply

Answer 30

% change in quantity supplied/Change in price. Perfectly inelastic supply curves would exist if firms cannot vary input usage. Regardless of the price the firm has to use all inputs if it produces at all.

Question 31

In a long run competititve market

Answer 31

Setting a ceiling price dictated by market forces would create a excess demand for the product
A surplus would be produced if a floor price ( under which no supplier could sell) were set above the equilibrium price suppliers would supply excess product at inflated price.

Question 32

The impact of a Government price support program

Answer 32

result in surpluses because the program acts as a subsidy that will encourage the suppliers increase supply beyond an equilibrium point

Question 33

Cost leadership: Organization seeks to capture market

through maintaining lower costs

Answer 33

cost leadership

differtiation-Organisations seeks to capture market share by demonstrating product value

Question 34

SWOT analysis

Answer 34

Evalution of internal and external factors contributing to an organizations success is referred to as strengths, weaknesses, opportunities and threats. strength and weakness are internal factor and oppertunits and threats are external.

Question 35

Theory of constraints

Answer 35

evolution technique for optimizing through put time. it does not releate to overall strategy evolution

Question 36

The demand and supply for a product

Answer 36

will cause equilibrium point to increase

Question 37

Micheal porters five things that affect propablity

Answer 37

Existance of a substitute product
barriers to market entry
bargaining power of customers
market competitiveness
bargaining power of suppliers