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 beA. 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 itA. 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 thenA. 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 onA. 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 competitorsA. 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 isA. 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 ifA. 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 thatA. 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 ratioA. 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 mightA. 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 byA. 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 includeA. 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 byA. 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 products;C. 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 competitionA. 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 thatA. 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 shouldA. 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 shouldA. 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 byA. 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 developmentCategory: essay
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