Chapter 12

which of the following is an example of price competition? a.) Nike signs LeBron James to a $90 million contract for endorsements. b.) Kellogg's put the images of Snap, Crackle, and Pop on boxes of Cocoa Krispies c.) McDonald's introduces new garden Mcsalad d.) Tropicana introduces new juice e.) Apple offers a 20% discount on its new range of iPhones

Apple offers a 20% discount on it's new range of iPhones

Which of the following theories applies to strategic behavior? a.) Field theory b.) Game theory c.) Theory of Consumers' Behavior d.) Social contract theory e.) Rational choice theory

Game Theory

A monopolistically competitive market is characterized by: a.) one firm selling a unique product b.) many firms selling identical products c.) many firms selling similar but differentiated products d.) few firms selling similar but differentiated products

Many firms selling similar but differentiated products.

The Gulf Cartel and Sinaloa Cartel are two major cartels in illegal drug trade in Mexico. Although, each of these cartels are better off sharing the market, they have an incentive to try to take the entire market. In which of the following ways is cheating among these cartel members dealt with in this region? a.) through gov. taxation policy b.) through legally enforceable contracts c.) through restrictions on the supply of inputs used by the firms d.) through output quota and price ceiling e.) though violence and drug wars

Through violence and drug wars

In a long run equilibrium, the monopolistically competitive firm: a.) will break even b.) will cease to advertise c.) will earn a positive economic profit d.) will face a perfectly elastic demand curve e.) will no longer need to engage in non-price competition.

Will break even

An efficient way to move toward the Nash equilibrium is called: a.) an agreement b.) a convention c.) a principle d.) a resolution e.) a convergence

a convention

An oligopoly market consists of: a.) many firms which produce a standardized product b.) at least five firms one of which dominates the market c.) firms that make independent pricing and output decisions d.) a group of firms that dominate the market e.) firms which face perfectly elastic demand curves

a group of firms that dominate the market

Actions that allow oligopoly firms to coordinate their pricing behavior without explicit collusion are referred to as _________. a.) strategic behavior b.) differential pricing strategies c.) facilitating practices d.) duopoly price discrimination mechanisms e.) independent practices

facilitating practices

In the context of market structure, the characteristic that best describes a monopolistically competitive market is that: a.)there are few firms in the market b.) the products produced cannot be easily differentiated. c.)entry and exit are both difficult d.) firms spend a great deal on advertising and promotion e.)firms spend very little on advertising and promotion

firms spend a great deal on advertising and promotion

Oligopoly can arise from: a.) diseconomies of scale in production b.) limited demand for a product in the market c.) gov. regulations d.) easy availability of crucial inputs e.) reduction of trade barriers

government regulations.

monopolistic competition, firms may differentiate their products in many ways except on the basis of: a.) quality b.) style c.) price d.) packaging e.) guarantees

price

When firms in an illegal market from a cartel,________ a.) they are able to supply higher quality products b.) it becomes more difficult for police to detect their activities c.) they are able to increase profits by behaving as a monopolist d.) they face a deadweight loss e.) they rely on goodwill to ensure the stability of the cartel.

they are able to increase profits by behaving as a monopolist

Why is a firm in a monopolistically competitive industry considered a "mini" monopoly? a.) There are a large number of sellers in the market b.) each firm in monopolistic competition is a price taker c.) the product is unique in some way or the other d.) each firm faces a perfectly elastic demand curve. e.)There exist a large number of close substitutes of the products

The product of each firm is unique in some way or the other

The condition under which a cartel can maintain its stability is that: a.) the barriers to entry should be relaxed b.) an identical product should be produced by the colluding firms c.) there should be a larger number of firms in a market d.) there should be legal barriers to share agreements e.) the products of the colluding firms should be highly differentiated

an identical product should be produced by the colluding firms

The most-favored customer is one who: a.) buys a firm's product regularly b.) is an acquaintance of the owner of the firm c.) is guaranteed to receive the lowest price for a prodcut d.) spends the maximum amount of money on a firm's product e.) has a high purchasing power

is guaranteed to receive the lowest price for a product.

The firms is an oligopoly market structure agree to collude because: a.) it helps them to earn more profits b.) each firm wants to know the strategy of its rivals c.) each firm wants to charge a lower price for its product than its rivals d.) the firms want to maintain a healthy relationship with each other e.) it helps them to enjoy economies of scale

it helps them to earn more profits.

When firms use cost-plus pricing in a market, a.) each firm determines its price based on other firms' costs and prices b.) it may appear as though firms are colluding in price when they actually are not c.) prices of different firms diverge widely d.) each firm falls short of maximizing profit as they charge the same price irrespective of their costs e.) each firm sells only to its most-favored customer

it may appear as though firms are colluding in price when they actually are not.

One reason that monopolistically competitive firms often use celebrity endorsements is that: a.) the firms owners like to be around celebrities so they can feel important b.) they can link their product's reputation with the celebrity's reputation c.) celebrity endorsements are comparatively inexpensive d.) they can have the celebrity as their potential customer e.) firms like to spend a lot on advertisements

they can link their product's reputation with the celebrity's reputation.

If firms are successful in product differentiation: a.) their demand will become relatively elastic b.) consumers will believe that the firms are producing more or less identical goods c.) they can raise their prices without losing all of their customers to rivals d.) they tend to face a horizontal demand curve e.) they gradually emerge as price takers

they can raise their prices without loosing all of their customers to rivals.

The objective of creating a brand name is: a.) To reduce the price of the product b.) To ensure a steady supply of the good in the market c.) to reduce the price elasticity of demand d.) to reduce the cost of production of the firm e.) to attract rival firms into the market

to reduce the price of elasticity of demand.