mat 540 quiz 4

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

Answer

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

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

Answer

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

Answer

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

Answer

Temporary discounts offered to customers by competitive
retailers usually reflect:

Answer

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 P₀and 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 P₀and
output Q
shown by the intersection of the long-run supply curve (LRS) and market
demand (D).
Figure 8-4

Answer

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

Answer

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

Answer

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

Answer

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

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

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

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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

Answer

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

Answer