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ECO 561 Week 3 Knowledge Check




Question;ECO/561 Week 3 Knowledge Check;1. A;purely- or perfectly-competitive firm would be characterized by which of the;following?;A. Large number of;firms, price taker, free entry and exit, and standardized productB. Large number of;firms, price maker, free entry and exit, and a differentiated productC. Small number of;firms, price maker, limited entry and exit, and a standardized productD. One firm, price;maker, limited entry and exit, and a unique product2. For;a purely-competitive firm, price must be;A. equal to marginal;revenue and average revenueB. greater than marginal;revenue and average revenueC. greater than marginal;revenue, and equal to average revenueD. less than both;marginal revenue and average revenue3. What;will excessive or economic profits induce for a firm in any industry structure?;A. entry into the marketB. exit from the marketC. equilibrium in the;marketD. greater demand in the;market4. A;pure-monopoly firm?s demand curve is also the market demand curve. This kind of;firm may successfully engage in price discrimination to increase its total;profit if it;A. engages in;rent-seeking behaviors to prevent possible price challenges from firms in;other industriesB. segregates its market;into clearly definable groups of consumers with different elasticity of;demand, and prevents buyers in one market segment from reselling to buyers;in another market segment.C. determines that;consumers are relatively sensitive to price changes along its envisioned;range of price differentials (price elastic)D. determines that;demand for its goods or services is relatively insensitive along its;envisioned range of differential prices (price inelastic)5.;Oligopolies are characterized by a small number of firms where the top three;firms hold the majority of the market. If in an oligopoly market, firm A is;almost twice as big as firm B and firm C then;A. firm A is perfectly;free to price however it chooses, since it is by far the most dominant;firm in the marketB. firm C has to beware;of pricing collusion by A and B to avoid being picked off in a price warC. firms A, B, and C;will tend to use non-price strategies to maintain their profits or market;share.D. firms B and C will;try to observe non-price strategies taken by firm A and follow similar;strategies to maintain their profits.6. In a;monopolistic competition industry, if one firm appreciably increased its price;from the existing equilibrium price, which of the following outcomes would most;likely ensue?;A. It would likely;suffer a significant decrease in its market share, because its competitors;would be unlikely to deviate from the established equilibrium price.B. The firm would stand;to gain much additional revenue if its competitors did not follow suit by;raising their prices.C. Any gain or loss in;the firm's revenue from increasing its price would depend on the price;elasticity of demand: The more elastic the demand, the higher the revenue;potential from a price increase.D. It would probably see;no change in its revenue position as its competitors would raise their;prices accordingly.7.;Which factor characterizes the competitive relationship between firms in an;oligopoly market structure?;A. Total independence of;action-reactionB. Interdependence: what;one firm does?in setting prices, determining production levels, investing;in R & D, and so forth?can significantly affect other firms;competitive positions.C. Despite the;relatively small number of oligopoly firms, the action(s) of any one firm;have little direct effect on the decisions of its competitors.D. The common practice;of collusive price-setting.8.;Unregulated (natural) monopolies maintain their status through a variety of;measures. Whether any particular measure can effectively constrain new firms;from entering the market depends on;A. proprietary;technology, exclusive ownership of resources, or government licenses.B. the number and size;of the firm(s) attempting to enter the marketC. the willingness of;suppliers and distributors doing business with the monopoly firm to boycott;potential entrantsD. the amount of revenue;loss the monopoly is willing to accept to undersell potential competitors9.;Regulated monopolies are empowered by public authority for which specific;reason?;A. The provision of a;good or service that, if left to the free market system, would require;additional government regulation to prevent negative externalities to;consumers as well as the public.B. The need to avoid the;unnecessary use of duplicate resources that could be more efficiently;employed by a single supplier to meet the needs of the broadest range of;consumers.C. The public policy of;protecting consumers from the excesses of unrestricted, demand-driven;pricing.D. The government's goal;of maintaining artificially low prices for particular goods or services.10.;Using a significantly greater economy of scale?with attendant lower, long-run;average total costs?to restrict the market entry of new competitors;A. can be a successful;tactic for established firms regardless of industry type, technology;market dynamics, or nature of the consumer baseB. may not be effective;in industries in which dynamic technology-driven changes frequently alter;the demand for product design features, performance qualities, and or;production methodsC. is more effective in;industry structures having low, minimum efficiencies of scaleD. is a tactic seldom;employed due to legislation governing unfair trade practices11. In;technology-intensive oligopolies?characterized by dynamically evolving product;design?restricting the entry of additional firms is;A. not possible through;customary legal protections, such as patents, because of the wide latitude;of possible product alternatives afforded by highly advanced technologiesB. achieved by;patenting, the effective use of licensing restrictions, as well as by;maintaining sustained advantages in design and productionC. invariably a matter;of establishing and maintaining economy of scale to minimize long-run;average total costD. accomplished by;requiring key suppliers of production factors to do business exclusively;with firms currently in the industry12.;Whether the market structure is monopolistic or oligopolistic, a firm may;increase consumer demand for its product as an overall portion of market share;if;A. the firm acquires or;possesses a resource that is difficult or impossible for competitors to;imitate?such as a geographic location, technologies, or design and;production applications that cannot be replicatedB. it can field an;advertising campaign large and convincing enough to persuade large numbers;of consumers to purchase its productC. it repackages its;product to appeal to fashion trendsD. the firm restricts;distribution of its product to core market areas or demographic groups13. One;difference between firms already established in a monopolistic competition;industry and those attempting to enter it is that;A. existing firms often;have established, core-consumer marketing bases, while entrants may have;to advertise and otherwise promote themselves to develop market share in;the new industryB. product development;is more important than establishing market visibility for firms entering a;monopolistic industryC. cost control is more;difficult for incumbent than for entrant firms due to costs of counter marketingD. established firms may;be able to use product differentiation to help distinguish themselves from;new competitors14. An;average firm in an industry characterized by a homogeneous product, relatively;low barriers to entry, and a low concentration ratio;A. is unable to make any;changes in characteristic product design or services to enlarge its market;shareB. has no pricing;options but the market equilibrium priceC. can attempt to;increase market share through consumer-oriented changes in the design and;perceived value of its product(s)D. has numerous pricing;options ?frequent discounts, extended sales, and so forth?if it properly;uses the strength of its brand-image relative to those of its competitors15. A;monopolistic firm may operate in a relatively mature market with little;likelihood for significant change in technology or process efficiencies. To;maximize its profits, such a firm might;A. observe the existing;market equilibrium price and concentrate on lowering its break-even point;through cost reduction measuresB. consider diversifying;its product line by offering modestly-enhanced variants of the same good;or service and selling these at prices marginally higher than for its;existing productC. attempt to leverage;its existing resources to fund its acquisition of smaller competitors, in;hopes of increasing market share and revenueD. abandon the market;altogether, as it really has no effective way of changing the status quo16.;Production differentiation can effectively be achieved by;A. emphasizing the;weaknesses and disadvantages of competing products through comparative;advertising, especially in oligopoly marketsB. implementing a;broader range of combinations of price and quality than those offered by;competitorsC. concentrating;exclusively on market segments most likely to recognize differences in;product valueD. utilizing consumer;satisfaction surveys and other metrics to determine what it is the;customer really wants17.;While mass retail industries have one or several dominant producers, smaller;firms have a limited set of nonpricing options. The most feasible of these;include;A. attempting to garner;increased market share by simultaneously expanding capacity, increasing;economy of scale, and discounting pricesB. seeking to;differentiate themselves from their larger competitors by appealing to;specific niche marketsC. mimicking the;advertising, marketing, and other successful non-pricing strategies of the;dominant firm(s)D. attempting to develop;markets in related industries rather than trying to compete head-to-head;with industry leaders18. In;monopolistic competition industries, effective product differentiation is;illustrated by;A. widespread brand;recognition across most, if not all, consumer age and income groups;otherwise, the firm cannot generate sufficient demand to enlarge market;shareB. concentrated appeal;to consumers in market demographics most likely to want or use the firm's;principal productsC. a balanced;combination of innovation, new product development, and intensive;marketingD. having a;long-established reputation for distinctly superior product quality19.;Differentiation strategies vary in degree of effectiveness from one type of;market structure to another. For firms other than perfect competition;A. opportunities exist;throughout the acquisition, production, sales, and service process to;distinguish their products based on perceived quality and consumer appealB. the competitive;margin is so tight that they cannot afford the costs associated with;extensive product or market developmentC. selective product;development and enhancements which appeal to particular consumer classes;can create marketable differences between one firm's products and;another'sD. the best way of;distinguishing the firm's product is through every-day low pricing20. If;a firm?s industry devolved from a monopolistic competition into an;oligopolistic structure, the firm would discover that;A. clearly;distinguishing its products' unique attributes from those of competitors;in an oligopoly market would be more difficult for consumers than in a;monopolistic structureB. quality of;maintenance and warranty service would become more important as;differentiating attributes in an oligopoly marketC. nothing has changed.;It all depends on the individual industryD. as surviving firms;gain market share, they may enjoy lower average costs.21. A;firm can increase both profit and per-unit profit margin by lowering production;costs. To make this a long-term outcome, the firm should;A. acquire factors of;production at lower prices, defer planned investments in expansion;capital, and downsize its workforceB. increase productivity;through better applications of existing technologies, curtail product;development plans, and implement energy conservation programsC. seek to update;existing production technologies for greater future efficiencies, consider;alternative energy sources for production, and better retain and develop;its human and intellectual capital resourcesD. concentrate on;improving present levels of productivity through greater process;efficiencies, seeking to reinvesting the savings in future R&D;programs22. A;firm?s cost-reduction strategies may span multiple stages, from acquisition of;production input factors to product service and maintenance. When seeking to;lower cost in the short term, firms should;A. reduce capital;indebtedness through refinancing at more favorable long-term interest;ratesB. curtail output across;the board to reduce variable operating costsC. streamline and;consider alternative methods of productionD. attempt to;restructure long-standing contracts with suppliers and distributors, to;reduce fixed costs in the short-run23.;Firms can shift their marginal cost curves to the right, resulting in higher;outputs at the same or lower maximum-profit prices. This can be done by;A. eliminating;fixed-cost components in the short termB. reducing average;total cost through reorganizing, production and increasing efficiencies in;distributionC. only if demand for;the firm's product(s) shifts to the right: Businesses are always demand;drivenD. better product;innovation through enhanced research and development


Paper#55347 | Written in 18-Jul-2015

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