Exam 8: Competition and Strategy

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. -Refer to Figure.What will be the profit maximizing output and price for the perfume monopolist if it is producing and retailing its output?

Ezybuy is a newly opened chain of departmental stores that offers its customers free home delivery for purchases above $100.If this promotional policy increases the cost borne by the seller by $10 for every transaction, while each customer values this service at $3, it can be said to generate economic value.

Suppose Melita is willing to pay a maximum of $30 for a pair of normal sunglasses and $36 for the same pair with a double UV-protection filter.If the unit cost of upgrading a product is $6, the seller will upgrade the product if Melita pays at least $35 for it.

If the seller of a good gets less than his/her opportunity cost and the buyer pays more than his/her valuation of the good, economic value is created.

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

In a market characterized by a single seller and many buyers, will a seller's initiative to improve the quality of its product at a higher cost of production be profitable?

One possible reason for Wal-Mart's success is that centralized-decision making provides economies of scale that allow it to aggressively bargain down wholesale prices of standard consumer goods.

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. -Refer to Figure .Will the firm invest in the purchase of new machinery which improves the quality of its product?

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

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

The figure given below represents a firm in a market characterized by many buyers and one seller.MC represents the marginal cost, MR the marginal revenue, and D the demand curve of a firm.The firm is initially in equilibrium producing 6 units of output at a price of $10 per unit. -Refer to Figure .Suppose the adoption of a new cost saving technology lowers marginal cost by $2 although the buyer's valuation remains unchanged.This allows the firm to produce 8 units of output at a price of $8 per unit.The profit earned by the firm will:

In a market characterized by many sellers, explain graphically the impact of an economic change which reduces transaction costs to zero for both the buyers as well as the sellers.

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). -Refer to Figure .Which of the following can be concluded about the innovative firm which reduces its marginal and average cost by using the new technology?

What are the benefits of a franchise contract?

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). -Refer to Figure .Suppose some of the preexisting firms adopt the cost effective technology of the innovator while non-adopters that are incurring losses shut down.The high cost sellers produce the rest of the market output.What will happen to the equilibrium price level?

Which of the following is an example of a durable strategy undertaken by firms to prevent competition?

Which of the following is considered per se illegal under the U.S.antitrust law?

Temporary discounts offered to customers by competitive retailers usually reflect:

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

The difference between opportunity cost of the sellers and the valuation of the buyers is known as: