Question 1

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.Which option is preferred?
A)Option One
B)Option Two
C)Option Three
D)Option Four

Accepted Answer

C

Question 2

The following information pertains to three different products being sold by Andy Company: $\begin{array}{ccccc}
\text { Product }& \text { Old Price } &\text { New Price } & \text { Old Quantity } & \text { New Quantity }\
\hline\text { A } & \$ 10.00 & \$ 11.00 & 2,000 & 1,900 \
\text { B } & 20.00 & 18.00 & 4,000 & 4,600 \
\text { C } & 30.00 & 33.00 & 6,000 & 5,500 \
\text { D } & \$ 40.00 & \$ 38.00 & 8,000 & 10,000
\end{array}$

Which product has an elastic demand curve?
A)Product A
B)Product B
C)Product C
D)Product D

Accepted Answer

Product D has an elastic demand curve because the percentage change in quantity demanded is greater than the percentage change in price.

Question 3

Which of the following markets is characterized by the following: many buyers and sellers,a homogeneous product,easy entry into and exit from the industry,and all firms are price takers?
A)perfectly competitive market
B)monopolistic competition
C)monopoly
D)oligopoly

Accepted Answer

The characteristics described in the question are those of a perfectly competitive market. In such a market, no individual firm has the power to influence the price of the product, as there are many sellers and buyers who are willing to buy and sell the product. The product is homogeneous, which means that there is no differentiation among the products sold by different firms. The barriers to entry and exit from the industry are low, which means that firms can easily enter or exit the market.

Question 4

What is the definition of markup?
A)The markup is a percentage applied to base cost.
B)The markup is an absolute rule.
C)A major advantage of markup pricing is that standard markups are easy to apply.
D)The markup can be calculated using a variety of bases.

Accepted Answer

Markup is typically defined as a percentage applied to the base cost to determine the selling price.

Question 5

Which of the following markets is characterized by the following: many firms in the industry,a somewhat unique product,fairly easy entry into the industry,and spending for differentiation of the product?
A)perfectly competitive market
B)monopolistic competition
C)monopoly
D)oligopoly

Accepted Answer

Monopolistic competition is characterized by many firms in the industry, a somewhat unique product, fairly easy entry into the industry, and spending for differentiation of the product. In this market, firms have some control over their prices and can differentiate their products in order to attract customers. However, competition is still present and entry into the industry is relatively easy.

Question 6

Which of the following is NOT an example of a market structure?
A)barrier market and oligopoly
B)perfectly competitively and monopoly
C)barrier market and monopoly
D)perfectly competitive and supply

Accepted Answer

The answer of Which of the following is NOT an...

Question 7

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.What is the profit or loss from Option Two?
A)$40,000
B)($100,000)
C)$100,000
D)$600,000

Accepted Answer

Option Two involves cutting the price to $60 and reducing material costs by $10, thus making the variable cost $46 ($56 - $10). With the sale of 10,000 units, the total revenue would be $600,000 ($60 x 10,000). The total variable costs would be $460,000 ($46 x 10,000). Fixed costs are reduced by $60,000 from $100,000 to $40,000. Therefore, the profit is calculated as total revenue minus total variable costs and fixed costs: $600,000 - $460,000 - $40,000 = $100,000.

Question 8

Which type of expenses does a monopoly usually incur that are different from the other types of market structures?
A)marketing costs such as advertising,positioning,discounting,and coupons
B)costs of differentiation such as advertising,rebates,coupons
C)administrative expenses
D)legal and lobbying expenditures

Accepted Answer

Monopolies often face legal and regulatory expenses, such as defending against antitrust lawsuits and lobbying to influence government policies. These types of expenses are unique to monopolies and not typically incurred by firms in other market structures.

Question 9

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.What is the profit or loss from Option Three?
A)($60,000)
B)$110,000
C)$215,000
D)$1,200,000

Accepted Answer

Option Three involves selling 15,000 units at $80 each, with a $10 rebate that 30% of buyers will redeem. The effective price per unit is $80 - ($10 * 0.3) = $77. The revenue is 15,000 * $77 = $1,155,000. The total variable cost is 15,000 * $56 = $840,000. The fixed cost is $100,000. Profit = Revenue - (Variable Costs + Fixed Costs) = $1,155,000 - ($840,000 + $100,000) = $215,000.

Question 10

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.What customer type has the least total cost per case?
A)local pharmacies
B)drugstore chains
C)supermarket chains
D)gas station chains

Accepted Answer

The answer of Anderson Company manufactures a variety of toys...

Question 11

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.What is the total cost per case for drugstore chains?
A)$2.17 per case
B)$2.20 per case
C)$2.35 per case
D)$2.45 per case

Accepted Answer

The answer of Anderson Company manufactures a variety of toys...

Question 12

Which of the following correctly describes the slope of the demand and supply curves?

$\begin{array}{llcc}
&\underline{  \text { Demand Curve } }&& \underline{ \text {
Supply Curve  }} \
\end{array}$
A)$\begin{array}{llcc}
  \text { upward sloping } &&  \text {  downward sloping} \
\end{array}$
B)$\begin{array}{llcc}
  \text {  no slope} &&&&&&  \text {upward sloping  } \
\end{array}$
C)$\begin{array}{llcc}
  \text {  downward sloping } &&  \text {no slope  } \
\end{array}$
D)$\begin{array}{llcc}
  \text { downward sloping } &&  \text { upward sloping } \
\end{array}$

Accepted Answer

The answer of Which of the following correctly describes the...

Question 13

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.What is the profit or loss from Option One?
A)$110,000
B)$210,000
C)$950,000
D)($1,050,000)

Accepted Answer

For Option One, the calculation is as follows: Sales revenue = 15,000 units * $70 = $1,050,000. Variable costs = 15,000 units * $56 = $840,000. Fixed costs = $100,000. Profit = Sales revenue - Variable costs - Fixed costs = $1,050,000 - $840,000 - $100,000 = $110,000.

Question 14

What is the impact of expenses related to specific market structure types?
A)Monopolistic competition and oligopolies are the only structures where costs of differentiation have an impact.
B)Both monopolies and monopolistic competition structures normally must expend legal and lobbying costs.
C)In perfect competition and monopolistic competition,differentiation costs have an impact.
D)In perfect competition and oligopolies,there are no special expenses related to the structure of the organization.

Accepted Answer

The answer of What is the impact of expenses related...

Question 15

What is the definition of oligolopoly?
A)a structure that has many buyers and sellers,but the products are differentiated on some basis
B)a structure where customers are willing to pay a little more for the unique feature that appeals to them
C)a structure that combines perfect competition and monopoly,but is closer to a competitive situation
D)a structure characterized by very few sellers and high barriers to entry

Accepted Answer

Oligopoly is a market structure characterized by very few sellers, which makes it difficult for new firms to enter the market due to high barriers to entry, such as economies of scale or legal restrictions. The few firms in an oligopoly can affect the price, output, and quality of goods and services.

Question 16

Which of the following markets is characterized by the following: only a few firms in the industry,a fairly unique product,difficult entry into the industry,and spending for differentiation of the product?
A)perfectly competitive market
B)monopolistic competition
C)monopoly
D)oligopoly

Accepted Answer

An oligopoly market is characterized by only a few firms in the industry, a fairly unique product, difficult entry into the industry, and spending for differentiation of the product. In this market structure, firms may collaborate instead of competing with each other, which can lead to noncompetitive pricing and limited consumer choice.

Question 17

The following information pertains to four different products being sold by Andy Company: $\begin{array}{ccccc}
\text { Product }& \text { Old Price } &\text { New Price } & \text { Old Quantity } & \text { New Quantity }\
\hline\text { A } & \$ 10.00 & \$ 11.00 & 2,000 & 1,900 \
\text { B } & 20.00 & 18.00 & 4,000 & 4,600 \
\text { C } & 30.00 & 33.00 & 6,000 & 5,500 \
\text { D } & \$ 40.00 & \$ 38.00 & 8,000 & 10,000
\end{array}$
 Which product has an inelastic demand curve?
A)Product A
B)Product B
C)Product C
D)Product D

Accepted Answer

A product with an inelastic demand curve is one where consumers are not very responsive to changes in price. This means that changes in price will not have a significant effect on the quantity demanded of the product. Product A has a limited availability and a unique feature, which makes it less responsive to price changes. Therefore, its demand curve is likely to be inelastic.

Question 18

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.What customer type is the most profitable?
A)local pharmacies
B)drugstore chains
C)supermarket chains
D)gas station chains

Accepted Answer

Supermarket chains are the most profitable customer type because they have the highest sales volume.

Question 19

Which of the following markets is characterized by the following: a single firm in the industry,a unique product,and difficult entry into the industry?
A)perfectly competitive market
B)monopolistic competition
C)monopoly
D)oligopoly

Accepted Answer

A market with a single firm in the industry, a unique product, and difficult entry into the industry is characterized as a monopoly. A monopoly is a market structure in which a single firm dominates the entire market without any close substitutes, and barriers to entry are high, making it difficult for new firms to enter the market.

Question 20

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.What is the profit per case for drugstore chains?
A)$2.15 per case
B)$2.20 per case
C)$2.35 per case
D)$4.50 per case

Accepted Answer

The question seems to be incorrectly framed as it asks about profit per case for drugstore chains, which is unrelated to the options provided for Anderson Company's board game pricing strategies. However, based on the context of the board game scenario, Option Three seems to be the most profitable.

Quiz 12: Pricing and Profitability Analysis

Which of the following markets is characterized by the following: many buyers and sellers,a homogeneous product,easy entry into and exit from the industry,and all firms are price takers?

What is the definition of markup?

Which of the following markets is characterized by the following: many firms in the industry,a somewhat unique product,fairly easy entry into the industry,and spending for differentiation of the product?

Which of the following is NOT an example of a market structure?

Which type of expenses does a monopoly usually incur that are different from the other types of market structures?

What is the impact of expenses related to specific market structure types?

What is the definition of oligolopoly?

Which of the following markets is characterized by the following: only a few firms in the industry,a fairly unique product,difficult entry into the industry,and spending for differentiation of the product?

Which of the following markets is characterized by the following: a single firm in the industry,a unique product,and difficult entry into the industry?