Question 1

When can a seller's investment in reducing transaction cost increase the price of the product to customers but still leave them better off?

Accepted Answer

When the seller tries to reduc

Question 2

Assume that the adoption of a new technology costing $8 per year lowers the marginal cost of producing Good X from $7 to $3.The firm will adopt the new technology if it expects annual profit to increase from $14 to $18.

Accepted Answer

A) True 
 B)False

Question 3

A person with no competitive ideas can earn above market average returns at low risk by investing in a diversified portfolio of stocks.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) Investing in assets that cannot easily be redeployed to other uses or locations. 
B) Donating a portion of its annual profit to hurricane affected families 
C) Providing good quality products at a high price. 
D) Investing in in-house research 
A) Investing in assets that cannot easily be redeployed to other uses or locations. 
B) Donating a portion of its annual profit to hurricane affected families 
C) Providing good quality products at a high price. 
D) Investing in in-house research

Question 5

In a market characterized by a single seller and many buyers, a seller's investment to reduce transaction costs can lead to which of the following situations?

Accepted Answer

A) It can reduce producer surplus in the long run. 
B) It can raise the price paid by customers and still make them better off. 
C) It can decrease the brand value of the product. 
D) It can lower the quality of the product in the long run. 
A) It can reduce producer surplus in the long run. 
B) It can raise the price paid by customers and still make them better off. 
C) It can decrease the brand value of the product. 
D) It can lower the quality of the product in the long run.

Question 6

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 .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.)

Accepted Answer

A) The marginal cost curve will shift upward from MC to MC'. 
B) The marginal cost and demand curve will shift upward to MC' and MR' respectively. 
C) The marginal revenue and demand curve will shift upward to MR' and D' respectively. 
D) The marginal cost and marginal revenue will shift upward to MC' and MR' respectively 
A) The marginal cost curve will shift upward from MC to MC'. 
B) The marginal cost and demand curve will shift upward to MC' and MR' respectively. 
C) The marginal revenue and demand curve will shift upward to MR' and D' respectively. 
D) The marginal cost and marginal revenue will shift upward to MC' and MR' respectively

Question 7

Which of the following factors affect vertical integration of firms?

Accepted Answer

A) The demand for the final product in the market. 
B) The market power of each firm in an industry. 
C) The number of firms in an industry. 
D) The transaction cost at each stage of production. 
A) The demand for the final product in the market. 
B) The market power of each firm in an industry. 
C) The number of firms in an industry. 
D) The transaction cost at each stage of production.

Question 8

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

Accepted Answer

A) benefit both buyers and sellers. 
B) cause both buyers and sellers to lose. 
C) benefit the buyers but cause the sellers to lose. 
D) benefit the sellers but cause the buyers to lose. 
A) benefit both buyers and sellers. 
B) cause both buyers and sellers to lose. 
C) benefit the buyers but cause the sellers to lose. 
D) benefit the sellers but cause the buyers to lose.

Question 9

Food retailers usually do not compete on which of the following factors?

Accepted Answer

A) Price 
B) Variety 
C) Location 
D) Packaging 
A) Price 
B) Variety 
C) Location 
D) Packaging

Question 10

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 technology lowers the cost of production while the buyer's valuation remains unchanged.Which of the following changes will be observed by the firm?

Accepted Answer

A) The demand curve for its product will shift to the left. 
B) The marginal cost curve will shift downward. 
C) The equilibrium output of the firm will fall below 6 units. 
D) The marginal revenue curve will shift downward. 
A) The demand curve for its product will shift to the left. 
B) The marginal cost curve will shift downward. 
C) The equilibrium output of the firm will fall below 6 units. 
D) The marginal revenue curve will shift downward.

Question 11

Large firms that invest in specific assets which cannot easily be redeployed to other uses or locations, may be able to protect their profits for longer than if they do not make such investments.

Accepted Answer

A) True 
 B)False

Question 12

Explain the functioning and significance of vertical agreements.Use specific examples from the apparel and textile markets.

Accepted Answer

Two firms in different stages of a verti

Question 13

Which of the following is true about vertical mergers?

Accepted Answer

A) It improves coordination among the individual firms in an industry. 
B) It is an agreement among firms to follow a common pricing policy. 
C) It increases the competitiveness of the merged firms. 
D) It increases the market power of the merged firms. 
A) It improves coordination among the individual firms in an industry. 
B) It is an agreement among firms to follow a common pricing policy. 
C) It increases the competitiveness of the merged firms. 
D) It increases the market power of the merged firms.

Question 14

Assume that a product upgrade strategy adopted by a microwave oven manufacturer increases his marginal cost by $1.50.If the strategy also increases the demand for the product by $3.50 per unit, total economic value will increase.

Accepted Answer

A) True 
 B)False

Question 15

How is economic value created during transactions between buyers and sellers?

Accepted Answer

Buyer and seller both benefit from excha

Question 16

The figure given below represents a perfectly competitive market in long-run equilibrium.LRS represents the long-run supply curve of this market with demand (D) and price $50.When two large firms merge, output declines to 400 units and per unit production cost drops to $30.

-Refer to Figure .Which of the following regions in the figure represents the deadweight loss resulting from the merger?

Accepted Answer

A) Area of triangle APR 
B) Area of the square BCPQ 
C) Area of the triangle BQR 
D) Area of triangle ACB 
A) Area of triangle APR 
B) Area of the square BCPQ 
C) Area of the triangle BQR 
D) Area of triangle ACB

Question 17

Why is reliable data on the formation and survival of startups difficult to obtain?

Accepted Answer

Reliable data on the formation

Question 18

Innovative ideas often exist in an environment of uncertainty, and their probabilities of success usually cannot be determined in an objective way.

Accepted Answer

A) True 
 B)False

Question 19

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.

-Refer to Figure.Suppose the seller incurs an additional cost of $1 per unit of output to reduce the transaction costs of the buyers to zero.Determine the profit maximizing price and output when the buyers incur zero transaction cost.

Accepted Answer

A) Output = 2.5 units and price = $8.25 
B) Output = 2.5 units and price = $6.5 
C) Output = 3 units and price = $9 
D) Output = 3 units and price = $6.5 
A) Output = 2.5 units and price = $8.25 
B) Output = 2.5 units and price = $6.5 
C) Output = 3 units and price = $9 
D) Output = 3 units and price = $6.5

Question 20

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

Accepted Answer

A) Absence of unionization and encouragement of merit-based promotions. 
B) Complete control over the market price. 
C) Presence of regional managers in the field rather than at headquarters. 
D) Centralized control and inspection over the functioning of store managers. 
A) Absence of unionization and encouragement of merit-based promotions. 
B) Complete control over the market price. 
C) Presence of regional managers in the field rather than at headquarters. 
D) Centralized control and inspection over the functioning of store managers.

When can a seller's investment in reducing transaction cost increase the price of the product to customers but still leave them better off?

Assume that the adoption of a new technology costing $8 per year lowers the marginal cost of producing Good X from $7 to $3.The firm will adopt the new technology if it expects annual profit to increase from $14 to $18.

A person with no competitive ideas can earn above market average returns at low risk by investing in a diversified portfolio of stocks.

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

In a market characterized by a single seller and many buyers, a seller's investment to reduce transaction costs can lead to which of the following situations?

Which of the following factors affect vertical integration of firms?

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

Food retailers usually do not compete on which of the following factors?

Large firms that invest in specific assets which cannot easily be redeployed to other uses or locations, may be able to protect their profits for longer than if they do not make such investments.

Explain the functioning and significance of vertical agreements.Use specific examples from the apparel and textile markets.

Which of the following is true about vertical mergers?

Assume that a product upgrade strategy adopted by a microwave oven manufacturer increases his marginal cost by $1.50.If the strategy also increases the demand for the product by $3.50 per unit, total economic value will increase.

How is economic value created during transactions between buyers and sellers?

Why is reliable data on the formation and survival of startups difficult to obtain?

Innovative ideas often exist in an environment of uncertainty, and their probabilities of success usually cannot be determined in an objective way.

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

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Cost and Production

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Between the Extremes: Interaction and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Vertical Relationships

Employment Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters

Exam 8: Competition and Strategy

When can a seller's investment in reducing transaction cost increase the price of the product to customers but still leave them better off?

Assume that the adoption of a new technology costing $8 per year lowers the marginal cost of producing Good X from $7 to $3.The firm will adopt the new technology if it expects annual profit to increase from $14 to $18.

A person with no competitive ideas can earn above market average returns at low risk by investing in a diversified portfolio of stocks.

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

In a market characterized by a single seller and many buyers, a seller's investment to reduce transaction costs can lead to which of the following situations?

Which of the following factors affect vertical integration of firms?

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

Food retailers usually do not compete on which of the following factors?

Large firms that invest in specific assets which cannot easily be redeployed to other uses or locations, may be able to protect their profits for longer than if they do not make such investments.

Explain the functioning and significance of vertical agreements.Use specific examples from the apparel and textile markets.

Which of the following is true about vertical mergers?

Assume that a product upgrade strategy adopted by a microwave oven manufacturer increases his marginal cost by $1.50.If the strategy also increases the demand for the product by $3.50 per unit, total economic value will increase.

How is economic value created during transactions between buyers and sellers?

Why is reliable data on the formation and survival of startups difficult to obtain?

Innovative ideas often exist in an environment of uncertainty, and their probabilities of success usually cannot be determined in an objective way.

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

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Cost and Production

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Between the Extremes: Interaction and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Vertical Relationships

Employment Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters