Question

1. Which of the following is most likely true of your business strategy if you decide to open a small local theater?

   		You will need to get the top movies to compete directly with the theater chains
   		You will not be able to succeed due to barriers to entry
   		You will likely look to run independent films or otherwise avoid directly competing with theater chains
   		Barriers to entry will be your best chance of achieving economic success
   		Antitrust laws will probably prevent you from doing so in order to preserve the market status of your competitors

4 points   

QUESTION 6

1. The Herfindahl-Hirschmann Index (HHI) addresses which question that is not indicated by the concentration ratio?

   		how market share is distributed by firms within the concentration ratio
   		how market share is distributed across a larger number of firms
   		the extent to which market dominance is being exercised by firms in an industry
   		the extent to which government involvement is limited price setting by firms
   		the extent to which the market is preventing price manipulation by firms

4 points   

QUESTION 7

1. Adam Smith’s “invisible hand” refers to

   		The mechanism that moves market price and quantity to equilibrium
   		The natural tendency of markets to avoid monopolies and ensure competition
   		The market’s incentive to lower price in order to increase quantity sold
   		The lack of government role in the free market due to the market’s ability to self-regulate
   		The tendency of firm’s to seek to merge in order to realize synergies and market dominance

4 points   

QUESTION 8

1. Which of the following would not constitute a way for a street vendor to differentiate her products from those of her competitors?

   		Customer service
   		Slightly alter the product through seasonings used
   		Use a slightly different cooking technique
   		Be personable and develop a personal rapport
   		None of the above…all constitute ways to achieve competitive differentiation

4 points   

QUESTION 9

1. Barriers to entry tend to be greatest in which market structure?

   		Monopoly
   		Oligopoly
   		Perfectly competitive
   		None; barriers to entry cannot exist in a functioning market
   		None; barriers to entry exist across all market structures

4 points   

QUESTION 10

1. Firms may take advantage of their ability to set prices by changing prices frequently in an effort to extract higher prices from consumers who are willing to pay more. This is called

   		Price Management strategy
   		collusion
   		limit pricing
   		third-order price discrimination
   		yield management

4 points   

QUESTION 11

1. Price support programs are most likely to exist in which of the following situations?

   		where there is information asymmetry
   		where sellers have too much influence over price
   		where antitrust enforcement is lax
   		where free riders exist
   		where buyer power is too great

4 points   

QUESTION 12

1. The US financial industry has exploited the lack of knowledge by consumers in order to greatly expand its profits, except when it famously failed and we had to come to its rescue. This is an example of

   		Effective Discrimination
   		the free rider problem
   		antitrust enforcement failure
   		moral hazard
   		collusion

4 points   

QUESTION 13

1. A cartel may result from which of the following?

   		Producer Cooperation Agreements (PCAs) in a perfectly competitive market
   		PCAs in a Producer Premium Market
   		The utilization of PCAs to eliminate producer surpluses
   		Inelastic consumer demand across an industry
   		collusion among firms in an oligopolistic market

4 points   

QUESTION 14

1. Deep discounting and limit pricing are utilized by firms in an effort to do what?

   		increase demand elasticity
   		Artificially change equilibrium price and quantity
   		Gain entrance into a market with high barriers to entry
   		avoid competition
   		Gain entrance into a market with high brand loyalty and/or brand identification

4 points   

QUESTION 15

1. Patents may be granted in order to seek to avoid which market problem?

   		price fixing
   		free riders
   		moral hazard
   		collusion
   		natural monopolies

4 points   

QUESTION 16

1. Which of the following is NOT an example or consequence of a market externality?

   		Flight attendants getting sick from second-hand smoke
   		Inadequate response to climate change
   		The rapid proliferation of large SUVs
   		Increased repair costs resulting from the purchase of cheap Chinese-made products
   		High societal health care costs resulting from care provided to uninsured Americans

4 points   

QUESTION 17

Answer 1

Q5. Option 3

Q6. Option 3. Fails to address the market complexities

Q7. Option 1. Un observable forces that tend to achieve the market equilibrium

Q8. Option 4.

Q9. Option 1. As it is difficult for other to enter in terms scale, limited resources etc

Q10. Opiton 3. As it helps to increase profit based on consumer surplus

Q11. Option 4. As it would lead to higher prices which would make consumers to pay more

Q12. Option 2

Q13. Option 4

Q14. Option 3. As it needs to attract customers

Q15. Option 2

Q16. Option 4