EC 201 Ch. 7

If a firm's economic loss is 10,000, ten its _______ is -$10,000

economic profit

service variability

the quality of services may vary greatly depending on who provides them and when, where, and how they are provided

product mix (or product portfolio)

the set of all products lines and items that a particular seller offers for sale

A firm that adopts a new cost-saving innovation will earn an economic profit in

the short run

Adam Smith's theory that the actions of independent self-interested buyers and sellers will often result in the most efficient allocation of resources is

the theory of the invisible hand

brand value

the total financial value of a brand

interactive marketing

training services employees in the fine art of interacting with customers to satisfy their needs

The Equilibrium Principle states that

when the market is in equilibrium, there are no further opportunities for gain available to individuals

in the long run, all firms in an industry will tend to earn

zero economic profit

If the market equilibrium is efficient, then:

-economic surplus is maximized, enabling society to more easily achieve its goals -it's not possible to find a transaction that will make some people better off without harming other s

the market equilibrium is only efficient if

-the market supply curve captures all of the relevant costs of producing another unit of the good -the market demand curve captures all of the relevant benefits of buying another unit of the good -the market is perfectly competitive

If the market for calculators is in a long run equilibirum, and the demand for calculators increases, then we would expect

The price of calculators to rise in the short run and firms to earn an economic profit in the short run.

differentiation

differentiating the market offering to create superior customer value

line extension

extending an existing brand name to new forms, colors, sizes, ingredients, or flavors of an existing product category

brand extension

extending an existing brand name to new product categories

If all of the firms in a market are identical and the equilibrium price in the market equals the minimum of each firm's average total cost curve, then we would expect

neither entry into nor exit from the market

If the total economic surplus from a market is thought of as a pie to be divided among the participants in the market, then imposing price controls will:

reduce the size of the pie

a firm's explicit costs include

the actual payments a firm makes to its factors of production

store brand (or private brand)

a brand created and owned by a reseller of a product or service

product line

a group of products that are closely related because they function in a similar manner, are solf to the same customer groups, are marketed through the same type of outlets, or fall within given price ranges

positioning

arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers

Any force that prevents firms from entering a new market is a called a _____ to entry

barrier

Price controls are often designed to help the poor, but the fact that they reduce total economic surplus means that alternative policies such as direct income transfers to the poor:

could make everyone better off

In general, price subsidies will _______ total economic surplus

decrease

The allocative function of price is to

direct resources away from overcrowded markets toward markets that are undeserved

market segmentation

dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes

The part of the payment for a factor of production that is greater than the owner's reservation price is called

economic rent

If it's not possible to find a transaction that will make some people better off without harming others, then the market equilibrium is

efficient

service inseparability

services are produced and consumed at the same time and cannot be separated from their providers

service intangibility

services cannot be seen, tasted, felt, heard, or smelled before they are bought

service perishability

services cannot be stored for later sale or use

brand equity

the differential effect that knowing the brand name has on customer response to the product or its marketing

a firm's implicit costs are

the opportunity costs of the resources supplied by the firm's owners

co-branding

the practice of using the established brand names of two different companies on the same product

If the market for soccer balls is in a long run equilibrium, and the demand for soccer balls falls, then we would expect

-firms to exit the market in the long run -the price of soccer balls to fall in the short run

It's always possible to design a transaction that will help both buyers or sellers whenever the price of a product is

either above or below the equilibrium price

In the firms in a market are earning a positive economic profit, then in the long-run _______ the market will lead economic profit to

entry into; fall

market targeting (targeting)

evaluating each market segment's attractiveness and selecting one or more segments to enter

If the firms in a market are earning an economic loss, then in the long run there will be ____ the market, leading the quilibrium price to ___

exit from; rise an economic loss implies that producers are earning less than their opportunity cost, so some firms will exit, leading to a decrease in market supply and an increase in equilibrium price

If a firm is earning a positive economic profit, then over time we would expect that firm's profit to

fall as new firms enter the market Positive economic profit creates an incentive for new firms to enter the market, leading supply to increase and equilibrum price to decrease, which in turn will lower the profit of firms in the market.

The opportunity cost of the resources supplied by a firm's owners is the firm's

normal profit

internal marketing

orienting and motivating customer-contact employees and supporting service employees to work as a team to provide customer satisfaction

service profit chain

the chain that links service firm profits with employee and customer satisfaction