chapter 14,16,17 Flashcards
A seller’s demand curve summarizes its……, and its marginal revenue curve measures its….
1.Incentive to increases production; cost of production.
2.market power; incentive to increase production.
3.market share; market power
4.customer power; cost of production
2.marker power; incentive to increase production.
output in market with market power is
1.efficient because marginal cost is equal to marginal revenue.
2.higher than output in a market with output market power.
3.more predictable then output in a marker without marker power due to product differentiation
4. inefficient because the marginal benefit to society of extra output exceeds the marginal cost.
- inefficient because the marginal benefit to society of extra output exceeds the marginal cost.
A city has four hospitals there are no other hospital within 200 miles two of the hospitals are specialized. The local for Hospital services can be more slowly described as.
1. perfectly competitive
2.an oligopoly
3. monopolistically competitive.
4. Monopoly
2.an oligopoly
A sellers demand curve summarizes its… and a marginal revenue curve measures it’s….
1. incentive to increases production; costs of production
2. market power; incentive to increase production
3. market share; market power
4. customer power; costs of production
- market power; incentive to increase production
Imperfect competition stems from _ whether the product is…
1. the product price; produced by all firms in the market.
2. the costs of production; identical across
firms
3. the number of sellers; differentiated
4. market power; a good or a service
the number of sellers; differentiated
In which of the following situations would Allie’s
Donuts have the greatest market power?
1.the closest donut shop is 10 miles away, but there is a bakery with breakfast pastries 2 miles away.
2. There are 2 rival donut shops within 3 miles of Allie’s but no other bakeries.
3. The closest donut shop or bakery is 25 miles away from Allie’s.
4.there are 5 other donut shops and 3
bakeries that sell breakfast pastries within
3 miles of Allie’s.
The closest donut shop or bakery is 25 miles away from Allie’s.
Perfectly competitive markets are relatively rare in the real world because most
1. goods are not identical and most markets have many firms.
2. firms advertise and most markets have many buyers.
3. goods are not identical and most markets have some dominant firms.
4. firms advertise and most markets have many firms.
goods are not identical and most markets have some dominant firms.
What are the main positive and negative impacts of mergers?
1.Increased competition and higher costs
2.Lower prices and more companies
3.Lower costs and increased market power
4.Decreased market power and higher prices
Lower costs and increased market power
Negative outcomes of market power include all of the following EXCEPT
1.smaller quantity
2.higher costs
3.larger profits
4.lower prices
4.lower prices
Which of the following markets is closest to an example of a perfectly competitive market?
1.Dining chairs
2.Apple computers
3.Corn
4.Fast-food hamburgers
3.Corn
The market power of a firm is its
1.market share based on the percentage of total market revenue.
2.ability to raise its price without losing many of its customers to competing businesses.
3.ranking based on units sold compared to other firms selling the same product.
4.ability to cause other firms in its market to drop out of the market.
2.ability to raise its price without losing many of its customers to competing businesses.
When it is difficult for customers to assess quality prior to consuming a product, they tend to rely on ______ as an indicator of quality.
1.informative advertising
2.brand reputation
3.new experiences
4.persuasive advertising
brand reputation
How does the threat of potential substitutes lessen the market power of a business? If the substitute becomes available, then the business may
1.reduce its costs by substituting one input for another input.
2.charge higher prices because the addition of the new substitutes will raise the level of customer satisfaction.
3.gain customers from the substitute market, adding to its profits.
4.lose customers to the substitute good’s market unless it lowers price.
lose customers to the substitute good’s market unless it lowers price.
When a market is perfectly competitive, advertising typically is done _________ because ________.
for the entire industry; with only one company, the market demand is the company demand.
by individual companies;it helps the advertising company stand out from the others.
for the entire industry; it affects market demand more effectively than some individual company demands
by individual companies; it effectively differentiates each company’s product
for the entire industry; it affects market demand more effectively than some individual company demands
A business owner spends on advertising with the intent that it will affect demand for the company’s product in what two ways? By
increasing the company’s demand and making its demand more elastic.
decreasing the company’s demand and making its demand more inelastic.
decreasing the company’s demand and making its demand more elastic.
increasing the company’s demand and making its demand more inelastic.
increasing the company’s demand and making its demand more inelastic.
When price competition occurs
profits rise and the number of sellers rises.
product differentiation rises and price rises.
price rises as competitive pressures increase.
price is pushed down, reducing profits.
price is pushed down, reducing profits.
The threat of entry includes
expansion of existing businesses into the market, the creation of a new product market, and new entrants.
expansion of existing businesses into the market, the addition of new distribution channels by existing businesses, and new entrants.
creation of a new product market, the addition of new inputs, and the expansion of an existing business into new distribution channels.
addition of new distribution channels by existing businesses, the expansion o
expansion of existing businesses into the market, the addition of new distribution channels by existing businesses, and new entrants.
Vertical integration occurs in a merger when the companies that merge
each produce different products whose productions are unrelated but are consumed together.
had a buyer-seller relationship prior to the merger, with each covering a different stage in a production chain.
are different sizes, with one being significantly larger than the other.
produce different types of products, such as one producing a service and the other a tangible good.
had a buyer-seller relationship prior to the merger, with each covering a different stage in a production chain.
Bargaining power is a buyer’s of seller’s ability to
reduce market supply to raise price.
negotiate a deal to its own benefit.
increase market demand.
get a lower price as a seller or higher price as a buyer.
negotiate a deal to its own benefit.
Which of the following is NOT a way to differentiate a product?
Add features to a product
Provide different types of customer service for a product
Change the quality of a product
Charge a lower price than other companies for a given product
Charge a lower price than other companies for a given product
Barriers to entry _______ existing businesses ______.
1.protect; from price wars
expose; to competitive pressures
expose; to limited pools of customers
protect; from competition by new entrants
4.protect; from competition by new entrants
Which of the following is NOT an example of a relationship-specific investment that could result in a hold-up problem?
buying customized equipment to produce output to the specifications of a major customer.
locating a factory near a major supplier of inputs.
organizing the layout of a factory for the most efficient flow of the production line.
training employees in the same computer system and programming used by customers to simplify transfer of data
organizing the layout of a factory for the most efficient flow of the production line.
What distinguishes persuasive advertising from informative advertising? Persuasive advertising
uses facts about the product to convey its excellence.
focuses on emotions and provides few facts about the product.
relies on statistics summarizing customer reviews.
focuses on brand reputation by frequent reminders of awards won by brand.
focuses on emotions and provides few facts about the product.
A company will be subject to price competition if
customers view its product as the same as or very similar to the products of rival companies.
there is successful product differentiation in the product market.
other producers are selling in the product market.
barriers to entry reduce the number of firms participating in the product market.
customers view its product as the same as or very similar to the products of rival companies.
