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• Question 1 2 out of 2 points Which of the following industries can create barriers to the entry of new firms due to size and specificity? Answer • Question 2 2 out of 2 points Which of the following activities undertaken by a competitive firm can improve its public relations? Answer • Question 3 2 out of 2 points Which of the following is a reason behind Wal-Mart’s success? • Question 4 2 out of 2 points If two small perfectly competitive firms merge, the merged firm will be: Answer • Question 5 2 out of 2 points Refer to Figure 8-1. If the firm purchases a new machinery which produces fewer defective units of output using the same variable inputs as before, which of the following changes will be observed? (Assume that consumers suffer losses from defective units that they cannot otherwise recover.) The figure given below represents a firm in a market characterized by many buyers and one seller. MC represents the initial marginal cost, MR the initial marginal revenue, and D the initial demand curve of the firm in equilibrium. Further, MC’, D’, and MR’ represents the revised marginal cost, demand, and marginal revenue respectively after the firm adopts the strategy discussed below. Figure 8-1 • Question 6 2 out of 2 points Temporary discounts offered to customers by competitive retailers usually reflect: Answer • Question 7 2 out of 2 points Refer to Figure 8-4. If a preexisting firm adopts a new cost effective technology (which reduces production costs). Which of the following changes will be observed? In the figure given below, Panel A represents preexisting firms which are in long run equilibrium at price P0 and output q0. MC and AC represents the marginal cost and the average cost of the preexisting firms. Panel B represents a market where every seller has the smallest ability to affect prices. The market is in equilibrium at price P0 and output Q shown by the intersection of the long-run supply curve (LRS) and market demand (D). Figure 8-4 • Question 8 2 out of 2 points Refer to Figure 8-6. Determine the profit earned by the perfume monopolist if it chooses to hire a retailer for selling its product. The figure given below represents a monopoly firm producing perfume with downward sloping demand and marginal revenue (MR) curves. The products of this firm are sold in the competitive market by a retailer. Among the horizontal lines in the figure: A – represents the marginal cost of per unit perfume production B – represents the marginal cost of an independent perfume retailer C – represents the sum of A and B D – represents the marginal cost of the perfume monopolist for retailing its own output E – represents the sum of A and D. Figure 8-6 • Question 9 2 out of 2 points Which of the following contracts contain vertical restrictions that limit the transacting parties’ choices but create economic value? • Question 10 0 out of 2 points In a market characterized by many sellers, if an outsider devises a way to reduce transaction costs it will: Answer • Question 11 2 out of 2 points Which of the following exemplifies an intangible durable strategy used by firms to prevent competition? • Question 12 2 out of 2 points In order to be successful as an innovator, a firm may require: • Question 13 2 out of 2 points A firm’s resource at a given point in time can be defined as: Answer • Question 14 2 out of 2 points Refer to Figure 8-3. Suppose the seller incurs an additional cost of $1 per unit of output to reduce the transaction costs of the buyers to zero. How will the profit earned by the seller change? The figure given below represents a firm in a market characterized by many buyers and one seller. MC is the initial marginal cost of the seller. MC’ denotes the marginal cost inclusive of the $1 transaction cost. On the other hand, buyers incur a transaction cost worth $2 represented by the vertical distance between D and D’. MR and MR’ represent the marginal revenue curve corresponding to the demand curves D and D’ respectively. Figure 8-3 • Question 15 Under which of the following situations would a seller prefer to incur the cost of improving the product quality?

• Question 1

2 out of 2 points

 

Which of the following industries can create barriers to the entry of new firms due to size and specificity?

Answer

 

• Question 2

2 out of 2 points

 

Which of the following activities undertaken by a competitive firm can improve its public relations?

Answer

 

• Question 3

2 out of 2 points

 

Which of the following is a reason behind Wal-Mart’s success?

• Question 4

2 out of 2 points

 

If two small perfectly competitive firms merge, the merged firm will be:

Answer

• Question 5

2 out of 2 points

 

Refer to Figure 8-1. If the firm purchases a new machinery which produces fewer defective units of output using the same variable inputs as before, which of the following changes will be observed? (Assume that consumers suffer losses from defective units that they cannot otherwise recover.)

The figure given below represents a firm in a market characterized by many buyers and one seller. MC represents the initial marginal cost, MR the initial marginal revenue, and D the initial demand curve of the firm in equilibrium. Further, MC’, D’, and MR’ represents the revised marginal cost, demand, and marginal revenue respectively after the firm adopts the strategy discussed below.

Figure 8-1

 

• Question 6

2 out of 2 points

 

Temporary discounts offered to customers by competitive retailers usually reflect:

Answer

 

• Question 7

2 out of 2 points

 

Refer to Figure 8-4. If a preexisting firm adopts a new cost effective technology (which reduces production costs). Which of the following changes will be observed?

In the figure given below, Panel A represents preexisting firms which are in long run equilibrium at price P0 and output q0. MC and AC represents the marginal cost and the average cost of the preexisting firms. Panel B represents a market where every seller has the smallest ability to affect prices. The market is in equilibrium at price P0 and output Q

shown by the intersection of the long-run supply curve (LRS) and market demand (D).

Figure 8-4

• Question 8

2 out of 2 points

 

Refer to Figure 8-6. Determine the profit earned by the perfume monopolist if it chooses to hire a retailer for selling its product.

The figure given below represents a monopoly firm producing perfume with downward sloping demand and marginal revenue (MR) curves. The products of this firm are sold in the competitive market by a retailer. Among the horizontal lines in the figure:

A – represents the marginal cost of per unit perfume production

B – represents the marginal cost of an independent perfume retailer

C – represents the sum of A and B

D – represents the marginal cost of the perfume monopolist for retailing its own output

E – represents the sum of A and D.

Figure 8-6

 

• Question 9

2 out of 2 points

 

Which of the following contracts contain vertical restrictions that limit the transacting parties’ choices but create economic value?

 

• Question 10

0 out of 2 points

 

In a market characterized by many sellers, if an outsider devises a way to reduce transaction costs it will:

Answer

 

• Question 11

2 out of 2 points

 

Which of the following exemplifies an intangible durable strategy used by firms to prevent competition?

 

• Question 12

2 out of 2 points

 

In order to be successful as an innovator, a firm may require:

 

• Question 13

2 out of 2 points

 

A firm’s resource at a given point in time can be defined as:

Answer

 

• Question 14

2 out of 2 points

 

Refer to Figure 8-3. Suppose the seller incurs an additional cost of $1 per unit of output to reduce the transaction costs of the buyers to zero. How will the profit earned by the seller change?

The figure given below represents a firm in a market characterized by many buyers and one seller. MC is the initial marginal cost of the seller. MC’ denotes the marginal cost inclusive of the $1 transaction cost. On the other hand, buyers incur a transaction cost worth $2 represented by the vertical distance between D and D’. MR and MR’ represent the marginal revenue curve corresponding to the demand curves D and D’ respectively.

Figure 8-3

 

• Question 15

 

Under which of the following situations would a seller prefer to incur the cost of improving the product quality?

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