Question

The Shoe that​ Won't Quit

I finally decided to buy a pair of​ Uggs, but when I got around to shopping for my​ Uggs, the style that I wanted was sold out. The scarcity factor is a strategy by​ Ugg's parent Deckers Outdoor that is one of the big reasons behind the​ brand's success. Deckers tightly controls distribution to ensure that supply does not outstrip demand. If Deckers ever opened up the supply of Uggs to meet​ demand, sales would shoot up like a​ rocket, but​ they'd come back down just as fast.

​Source:

Fortune​,

June​ 5, 2008

Explain why Deckers intentionally restricts the quantity of Uggs that the firm sells.

Deckers intentionally restricts the quantity of Uggs that it sells to​ _______.

A.

encourage competition

B.

eliminate markup

C.

lower fixed costs

D.

differentiate its product

2.Monopolistic competition is a market in which a​ _____ number of firms compete by making similar but slightly​ _____ products.

A.

​small; cheaper

B.

​large; different

C.

​large; costlier

D.

​small; different

Answer 1

Explain why Deckers intentionally restricts the quantity of Uggs that the firm sells.

Answer. The restricted supply strategy enables the firm to maintain high price for its product and enjoy economic profits.

1.

Answer.

A. Decker intensionally restricts the quantity of uggs that it sells not to encourage competition.

B. Decker intensionally restricts the quantity of uggs that it sells not to eliminate markup.

C. Decker intensionally restricts the quantity of uggs that it sells not to lower fixed cost.

D. Decker intensionally restricts the quantity of uggs that it sells to Differentiate its product.

2.

Answer.

Monopolistic competition is a market in which a LARGE number of firms compete by making similar but slightly DIFFERENT products.