Question;Unit 5 Quiz1. Question: Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states. How would you characterize these stores? Student Answer: Caribou Coffee and Diedrich Coffee are oligopolists while Dunn Brothers is a monopolistic competitor. Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is a monopolistic competitor. Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is an oligopolist They are all monopolistic competitor. Points Received: 1 of 1 Comments: 2. Question: Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful? Student Answer: the ability to produce the product at a lower cost changing consumer tastes a rise in the price of a key input for example, a rise in the price of oil leads to higher energy costs the choice of technology used to produce the product Points Received: 1 of 1 Comments: 3. Question: At the peak of its success in the mid-1980s to the early 1990s, Apple Computer commanded a 15 percent share of the personal computers market. Today, in 2007, its share of the growing personal computer market is estimated at 6 percent. Which of the following best accounts for its dwindling market share? Student Answer: Rivals engaged in predatory pricing but Apple was not willing to engage in a price war. The entry of rivals revealed that Apples was producing sub-standard computers. Apple was not able to keep up with technological advancements in the personal computers market. The entry of rivals eliminated Apple's product differentiation. Points Received: 1 of 1 Comments: 4. Question: Figure 12-6Refer to Figure 12-6. What is the amount of excess capacity? Student Answer: Q4 - Q3 units Q4 - Q2 units Q3 - Q2 units Q3 - Q1 units Points Received: 1 of 1 Comments: 5. Question: In what sense is a firm in monopolistically competition a monopoly in its market? Student Answer: It acts independently of other sellers. It sells a unique product. It is able to erect entry barriers by deliberately lowering its price. It acts to maximize market share. Points Received: 1 of 1 Comments: 6. Question: Table 13-1Alistair Luggage and Baine Baggage are the only firms selling window treatments in the upscale town of Montecito. Each firm must decide on whether to increase its advertising spending to compete for customers. If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 13-1 shows the payoff matrix for this advertising game.Refer to Table 13-1. Does Baine have a dominant strategy and if so, what is it? Student Answer: Yes, Baine should increase its advertising budget. Yes, Baine should keep its advertising budget as is. There are two dominant strategies: if Alistair increases its advertising budget, then Baine's best bet is to keep its budget the same but if Alistair does not increase its spending then Baine should raise its advertising budget No, there is no dominant strategy. Points Received: 1 of 1 Comments: 7. Question: In an oligopoly market Student Answer: the pricing decisions of all other firms have no effect on an individual firm. individual firms pay no attention to the behavior of other firms. advertising of one firm has no effect on all other firms. one firm's pricing decision affects all the other firms. Points Received: 1 of 1 Comments: 8. Question: Figure 13-4 Rainbow Writer (RW) is a small online company selling a highly rated software package for printing color labels directly onto CDs. The firm currently earns a profit of $2 million per year selling its package exclusively on its website. Odeon, the producer of the most popular software package for editing and burning CDs and DVDs, has expressed interest in bundling Rainbow Writer's product into its own package. Odeon expects that bundling would further boost its sales and allow it to sell the new bundled product at a higher price, thus raising its profits beyond its current profit of $12 million. Figure 13-4 shows the decision tree for the Rainbow Writer-Odeon bargaining game.Refer to Figure 13-4. In a real world situation involving Rainbow Writer and Odeon, what scenario below might permit Rainbow Writer to rationally refuse an offer from Odeon of $40 per copy of the software package? Student Answer: Odeon is also negotiating with Swift Colors, Rainbow Writer's chief rival. Odeon's competitors are also interested in bundling Rainbow Writer's software. Odeon hires a software developer to begin developing its own proprietary color labeling software. Odeon is considering new distribution outlets for its products. Points Received: 1 of 1 Comments: 9. Question: Oligopolies exist and do not attract new rivals because Student Answer: of competition. of barriers to entry. the firms keep profits and prices so low that no rivals are attracted. there can be no product differentiation. Points Received: 1 of 1 Comments: 10. Question: An oligopoly firm is similar to a monopolistically competitive firm in that Student Answer: both firms face the prisoners' dilemma. both operate in a market in which there are entry barriers. both firms have market power. both firms are in industries characterized by an interdependent firm.
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