Econ Module 10 quizzes

Your company sells 19 units at a price of $10 and must change price to $9.90 in order to sell 20 units. What is the marginal revenue of the twentieth unit? $8.00 -$.10 $198.00 $9.90

$8.00

Which statement describes a monopoly? Many firms produce identical products with no control over the market price. Many firms produce differentiated products with control over market price. A single firm produces a product with no close substitutes and control over the market price. A single firm produces a product with many close substitutes and limited control over the market price.

A single firm produces a product with no close substitutes and control over the market price.

Customers would be less loyal and more price sensitive in which of the following situations? The market's companies sell differentiated products. Customers are aware of the prices of all sellers. There is only one seller in the market. The switching costs are low.

The switching costs are low.

A characteristic of oligopoly that is not present in other market structures is that there is only one seller and that seller holds a high level of market power. are many sellers that produce identical products. are a small number of sellers and they have market power. are many sellers and each produces a differentiated version of the product.

are a small number of sellers and they have market power.

Monopoly profit will _____ when a monopolist goes from single-price monopoly to perfect price discrimination. remain the same increase decrease initially increase and then return to its original level

increase

In the long run, the number of sellers and the level of profit in a market are both affected heavily by the _____ in the market. type of product strength of the barriers to entry level of variable costs income tax levels

strength of the barriers to entry

Following the Rational Rule for Sellers, how does output for a seller who has market power compare to output for a seller who does not have market power? Output is the same in both situations. The level of market power has no impact on output. Output is higher with market power than without market power. Output is higher without market power than with market power.

Output is higher without market power than with market power.

All of the following government policies would create a barrier to entry in a market EXCEPT: a requirement that there can be no switching costs for consumers. a requirement that only companies with a license to produce the specific product can sell it. the granting of a patent to the developer of the product. a requirement that all versions of the product for sale are subject to extensive safety testing.

a requirement that there can be no switching costs for consumers.

Which of the following government policies would create a direct barrier to entry for new sellers in a market? banning switching costs to protect consumers granting a patent to the developer of a new product ensuring that all sellers have equal access to inputs taxing business profits with a progressive tax

granting a patent to the developer of a new product

When setting prices for different groups of customers, a manager should charge lower prices to groups that value the product more. have a higher demand. have a more elastic demand. have a more inelastic demand.

have a more elastic demand.

To prevent people from pretending to qualify for the market segment with the lowest price, a company manager that engages in group pricing needs to make sure that there is a simple way to verify the segment in which a consumer qualifies. there are equivalent prices paid by consumers in each segment. each consumer has no way of knowing the range of prices paid by other consumers. segmentation is on a detailed set of qualifications.

there is a simple way to verify the segment in which a consumer qualifies.

Which of the following sellers faces the least competitive pressure? a monopolist with no direct rivals one of 800 sellers in a market, each producing identical products an oligopolist with a few direct rivals one of 800 sellers in a market, each producing a differentiated product

a monopolist with no direct rivals

T/F Price discrimination is illegal under all circumstances. Airlines are often able to price discriminate. Firms do not have an incentive to price discriminate because it results in some groups paying a lower price than others. Perfect price discrimination occurs when perfectly competitive firms charge some people higher prices than others. All else being equal, single price monopolists earn lower profits than firms that can price discriminate Price discrimination only occurs with natural monopolies.

false, true, false, false, true, false

If a monopolist engages in perfect price discrimination: it produces the efficient quantity of output. there is no producer surplus. the producer surplus is equal to the monopoly profit. the government will impose an average cost pricing rule on the monopoly.

it produces the efficient quantity of output.

A 2009 article in the Economist explained a barrier to entry that existed 40 years ago for foreign banks wanting to operate in Britain. Foreign banks could not operate in Britain unless they had an office that was within walking distance of the Bank of England, which served as the industry's regulator at the time. This requirement served as a barrier to entry into the banking industry in Britain because customers faced high switching costs to transfer their bank accounts to foreign banks. existing banks threatened to crush any competitors that entered the market. office space within walking distance to the Bank of England was limited. there was a surplus of office space in this area of London.

office space within walking distance to the Bank of England was limited.

Mario's Bed & Breakfast is willing to offer discounts to customers, but it does not advertise discounts. Discounts are given only to customers who ask if any discounts are available or who seem very indecisive when inquiring rates. As a result of this practice, some customers pay full price, and others pay lower prices. Mario is practicing _____ through _____. price discrimination; quantity discounts hurdle method; segmentation segmentation; group pricing price discrimination; the hurdle method

price discrimination; the hurdle method

When the hurdle method is used to price discriminate, buyers sort themselves into reservation price groups based on their willingness to overcome the hurdle. face insurmountable obstacles to accessing the product. are put into a price group based on an observable, personal characteristic. are unaware that they are paying a different price than some of the other buyers

sort themselves into reservation price groups based on their willingness to overcome the hurdle.

Heri owns one of three shoe repair shops in his city. Then he loses some of his customers when a luggage repair shop expands its services to include shoe repair as well as luggage repair. Which of the five forces in the Five Force framework is Heri facing when the luggage shop expands its services? threat of entry threat of potential substitutes bargaining power of buyers threat of existing competitors

threat of entry

Bree's Bait Shop is a successful store that specializes in highly effective fishing tackle. Bree has employed a high‑tech computer tracking system that allows her to separate her customers into two different groups of consumers with differing price elasticities of demand. Bree is interested in increasing her profits through price discrimination and approaches your marketing firm for advice. Assuming her demand curve is downward sloping, you tell her there is one more crucial piece of information you must have in order to advise her. What do you ask Bree? Are your profits greater than your costs? What are your fixed costs? Can your customers resell your products to one another? What is your current price?

Can your customers resell your products to one another?

Under the Five Forces framework, how can the market power of customers impact a seller's profitability? Customers with market power can use their leverage to lower the selling price that sellers charge. The market power increases the total number of customers, raising market demand. They can raise the selling price sellers charge. The market power reduces the total number of customers, raising market demand.

Customers with market power can use their leverage to lower the selling price that sellers charge.

What is a natural monopoly? A monopoly that results from government issuing patents. A monopoly resulting from one firm's exclusive ownership of a natural resource required to produce a good. A monopoly that faces a high fixed cost and low marginal costs so that the average total cost curve slopes downward. A market in which there is only one firm.

A monopoly that faces a high fixed cost and low marginal costs so that the average total cost curve slopes downward

Arturo makes and sells organic frozen yogurt with fresh fruit toppings. He wants to price discriminate according to a preference for organic food so that those with the most inelastic demand for organic food pay the highest price. To accomplish this, to which group should he give discount coupons for his yogurt? Students at the local art school Customers of the local fast-food restaurant People who come to the community's weekly farmer's market Members of the local organic food co-op

Customers of the local fast-food restaurant

Which of the firms is most likely to be a natural monopoly? Municipal Power Light, the local supplier of electricity. A restaurant that is unable to practice price discrimination and must charge all consumers the same price. A firm that owns nearly all of the diamond mines in the world. A pharmaceutical company that has the exclusive right to sell a patented drug.

Municipal Power Light, the local supplier of electricity.

demand curves perfect competition on a graph? monopoly on a graph?

PC = straight demand curve monopoly = slanted line

what is bundling, perfect price discrimination, and imperfect price discrimination? 1. customers of the charter cable company who want to watch HBO channels must subscribe to a premium channel package that includes HBO, Cinemax, and Showtime channels 2. Microsoft offers student discounts for its computer software products. Non-students pay higher prices 3. At an auction of American art, every buyer ends up bidding and paying a price equal to the maximum amount that she or he is willing to pay 4. Kohl's department store offers a 15% discount every Wednesday to senior citizens

bundling: 1. customers of the charter cable company who want to watch HBO channels must subscribe to a premium channel package that includes HBO, Cinemax, and Showtime channels perfect price discrimination: 2. Microsoft offers student discounts for its computer software products. Non-students pay higher prices 4. Kohl's department store offers a 15% discount every Wednesday to senior citizens imperfect price discrimination 3. At an auction of American art, every buyer ends up bidding and paying a price equal to the maximum amount that she or he is willing to pay

When looking at a firm's behavior, you know it is engaging in price discrimination when it charges a different price to different customers that is not reflective of the firm's costs. asks about personal information such as race, gender, and sexual orientation before offering services. does not accept payment with a smartphone. charges customers more than they would prefer to pay.

charges a different price to different customers that is not reflective of the firm's costs.

Which of the scenarios does NOT fit into the model of the five competitive forces? competition created by bargaining power of buyers competition from substitute goods and services competition from complement goods and services competition from potential entrants competition from existing firms

competition from complement goods and services

The competitive forces in a market largely determine the _____ of the companies in the market. demand long-term profitability short-term vision product

long-term profitability

Which of the following is NOT an outcome of a market where sellers have market power? Lower costs An inefficiently small output Larger economic profits Higher prices

lower costs

When government regulations are influenced by lobbyists for the producers in a market, the regulations often: raise market demand. are biased in favor of consumer safety. make it more difficult for new producers to enter the market. reduce costs of production, increasing competitive pressures.

make it more difficult for new producers to enter the market.

A seller's incentive to increase production is reflected in its demand curve. marginal revenue curve. market equilibrium price. market share.

marginal revenue curve.

A firm's ability to raise its product price without losing many customers to competing businesses is known as competitive power. marginal revenue. revenue dependability. market power.

market power

The threat of potential substitutes is high when the substitutes: face high barriers to enter the market. have higher production costs than the original product. offer greater value for their price than the original product. cause customers to incur high switching costs.

offer greater value for their price than the original product.

When setting prices for different groups of customers, a manager should charge higher prices for groups that have lower marginal benefit. have a more elastic demand. value the product more. have a lower demand.

value the product more.

When segmenting your market demand into groups, base them on _____ and _____ characteristics. verifiable; difficult-to-change income; preference equal; unifying easy-to-observe; demand-unifying

verifiable; difficult-to-change

A company produces a particular cell phone that requires accessories (such as chargers, cases, and ear plugs) that are specific to that phone and cannot be used with phones manufactured by other companies. The company that produces this cell phone is using what strategy to create a barrier to entry? Intimidating rivals. Increasing switching costs to ensure demand for its product. Controlling the markets for key inputs needed by all firms in the product market. Creating cost advantages.

Increasing switching costs to ensure demand for its product.

How can a company's research and development expenditures create a barrier to entry into its market? It can result in new production technologies that reduce the cost of production. It prevents learning by doing, which keeps consumers from learning about new options. It generates larger network effects for the product. It increases switching costs, which means companies cannot change production techniques.

It can result in new production technologies that reduce the cost of production.

In which of the following situations would Max's Doughnut Shop have the greatest market power? There are two rival doughnut shops within three miles but no other bakeries. Within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries. The closest doughnut shop is 10 miles away, but there is a bakery with breakfast pastries two miles away. The closest doughnut shop or bakery is 25 miles away from Max's shop.

The closest doughnut shop or bakery is 25 miles away from Max's shop.

How would the discount effect on marginal revenue differ for a seller increasing sales from 100 units to 101 units compared to an increase in sales from 1,000 units to 1,001 units? The discount effect would be larger for a change from 100 to 101 units than 1,000 to 1,001 units. The discount effect would be the same in both situations and would be less than price. The discount effect would be smaller for a change from 100 to 101 units than 1,000 to 1,001 units. The discount effect would be the same in both situations and would be larger than price.

The discount effect would be smaller for a change from 100 to 101 units than 1,000 to 1,001 units.

In which of the following situations would a company have a lower chance of losing customers when it raises the price of its product? Companies advertise their prices. There are low switching costs. Customers have many sellers to choose from. The product is differentiated across companies.

The product is differentiated across companies.

In which of the following situations would the supplier have the greatest power to hurt a business that is its customer? The supplier rents building space to a bakery in a real estate market with a vacancy rate of less than .5%. The supplier is one of 100 companies selling the input needed by the business. The cost for the business to switch to a different supplier is low. The business could use an alternative input mix that uses significantly less of the supplier's product.

The supplier rents building space to a bakery in a real estate market with a vacancy rate of less than .5%.

Coupons and rebates provide discounts to the especially price-sensitive consumers even though they are available to all consumers. Why do only price-sensitive consumers avail these discounts? Price-Sensitive consumers are the only ones who receive the coupons and rebate forms. want to buy at full price in order to appear prosperous. have the identifying characteristic that the seller uses to segment the customers. are more willing to take the time to locate and use the coupons and rebate forms.

are more willing to take the time to locate and use the coupons and rebate forms.

Consumer surplus will _____ when a monopolist goes from single-price monopoly to perfect price discrimination. remain the same increase decrease initially increase and then return to its original level

decrease

A large department store advertises time-of-day discounts for particular items on a special sale day. The store is using _____ to create a _____ for the most price-sensitive customers to gain low prices. different prices at different times; hurdle haggling; segmentation alternate versions; group pricing bundling; segmentation

different prices at different times; hurdle

Which of the following is correct about the discount effect facing companies in perfectly and imperfectly competitive markets? Companies in perfect competition _____ it. Companies in imperfect competition _____ it. face; do not face face; face do not face; face do not face; do not face

do not face; face

Perfect price discrimination is characterized by charging customers a different price, depending on their income. each customer a price equal to his or her maximum willingness to pay. customers a different price, depending on their gender. different prices to customers based on when they purchase the good or service. prices that are different from competitors' prices.

each customer a price equal to his or her maximum willingness to pay.