BEC MCQ 5.4

Question 1

patents

Answer 1

are barriers to entry

Question 2

If the question says

Answer 2

product differentiation it is called as monopolistic competition
The presence of one company is monopoly. The presence of various companies is oligopoly

Question 3

When an oligopoly lowers it price others will match it

Answer 3

But, When oligopoly raise it others will ignore. The kink is at the prevailing price. above the prevailing price demand is elastic. Below highly inelastic

Question 4

References to change in quantity demanded

Answer 4

refer to a single demand curve which is downward sloping right

Question 5

If the demand curve shifts right

Answer 5

increase in demand. If the demand curve shifts left decrease in demand. Elasticity of supply and demand are unreleated. Perfectly elastic demand does not exist
Perfectly inelastic demand does not exist.

Question 6

Market clearing price

Answer 6

is the price of goods or service where the quantity demanded is equal to the quantity supplied

Question 7

what happens when the Government issue health and safety regulations of the product

Answer 7

Costs to produce the product will increase according to new standards and the price will pass on to the consumer

Question 8

complementary goods and substitute goods

Answer 8

If the price of complementary goods goes up the price of the product will also go up.
But if the price of the substitute goes up the price of product will

Question 9

Independent goods

Answer 9

Have demand not related. Ex. Bread and vacuum cleaners

Question 10

Inferior goods

Answer 10

Experience a decrease in demand when income level rise.

Question 11

Situations that would cause competition to be even stronger

Answer 11

The market is not growing fast
there are several equal size firm in the market
Customers do not have strong band preferences
The cost of exceeding the market exceed the cost of continuing to operate
Some firms profit from making certain moves to increase market share
the various firm in the market use different type of strategic plans

Question 12

Factors increasing bargaining power of customers

Answer 12

Customers make up a large value of firms business
There is much information available to customers
The buyers have low switching costs
There are number of alternate suppliers of the product

Question 13

Statements regarding competitive advantage

Answer 13

If the total cost of the firm are less than those of rivals then the firm is having a competitive advantage
Two major form of competitive advantage are product differentiation and cost leadership
Cost leadership advantage may be best obtained by a firm when the firm builds market share or match the price of rivals
Differentiation advantage is when the firm builds market share or increases its price.