Question 1

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

Accepted Answer

If a firm can produce a product at a lower cost than its competitors, it can set a lower price and still earn a profit. This can make the firm more competitive in the market and increase its market share, leading to higher sales and profits. On the other hand, if a firm cannot produce at a lower cost than its competitors, it may not be able to compete effectively, and may earn lower profits or even losses.

Question 2

Being the first to sell a particular good can give a firm advantages over other firms that sell similar products. What is the name given to these advantages?
A) first-mover
B) first come, first served
C) follow the leader
D) first to market

Accepted Answer

The advantages of being the first to sell a particular good are known as first-mover advantages. These advantages may include establishing brand recognition and customer loyalty, gaining access to key distribution channels, and creating barriers to entry for competitors.

Question 3

Some factors that allow firms to make economic profits are beyond its control. All but one of the following is an uncontrollable factor. Which factor is controllable?
A) input prices
B) consumer tastes
C) chance events
D) product differentiation

Accepted Answer

The answer of Some factors that allow firms to make...

Question 4

Explain the significance of brand management to a firm that has differentiated its product. Comment specifically on the importance of obtaining a trademark.

Accepted Answer

The answer of Explain the significance of brand management to...

Question 5

The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

Accepted Answer

Product differentiation refers to the ability of a firm to offer unique and distinct features, benefits or attributes that differentiate their product or service from competitors, and is a valuable tool for creating value for consumers. A manager or owner can control this factor by investing in research and development, marketing, packaging, design, and other aspects of the product or service.

Question 6

Which of the following statements is true?
A) Input prices are one of the success factors that firms can control.
B) Consumers will buy a product only if its price is below that of its competitors.
C) Consumers will buy a product only if it meets a need not met by competing products.
D) Sheer chance can play a significant role in the success or failure of a business.

Accepted Answer

The answer of Which of the following statements is true?
A)...

Question 7

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated. How do these problems affect the innovating firm?
A) The firm is protected by a first-mover advantage: initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs.
B) They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product.
C) Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products.
D) The firm's cost increases as it improves the product, but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode, although its market share remains secure.

Accepted Answer

Design flaws or problems with a new product can significantly affect the innovating firm's profits by reducing demand, increasing costs to rectify the issues, and opening doors to competitors who can enter the market with a better product. It can result in a loss of market share and erosion of initial profits. The first-mover advantage protects the firm only if the design flaws or problems do not harm the company's reputation and its ability to compete with the long-term. Consumers tend to be less forgiving when competing alternatives are readily available. While improving the product may increase costs, the firm may not be able to pass this on to the customers as they may already have concerns and fear of further defects.

Question 8

In a monopolistically competitive market, a successful new restaurant
A) can earn economic profits in the long run if it uses barriers to restrict entry by new restaurants.
B) will earn zero economic profit in the long run because of free entry, but competition will lead restaurants to offer different versions of the same product.
C) will face high entry barriers because of health and safety regulations to which all restaurants are subject.
D) must obtain a trademark to ensure that it will break even in the long run.

Accepted Answer

In a monopolistically competitive market, there is free entry and exit, meaning that new restaurants can easily enter the market. Therefore, in the long run, economic profits will be driven down to zero as more and more firms enter the market. However, the market still allows for differentiation of products, so a successful new restaurant can offer a unique product or experience that differentiates itself from the competition. This can result in a loyal customer base and potentially some short-term economic profits. However, in the long run, competition will eventually lead to zero economic profits.

Question 9

The most important of the factors that make a firm successful and that can be controlled by the firm's owners and managers are
A) the establishment of trademarks for its products and the aggressive defense of those trademarks.
B) lobbying government to erect or enforce entry barriers in its markets and the marketing of its products as widely as possible.
C) the differentiation of its products and the production of products at a lower average cost than competing firms.
D) the selection of the prices of its products and the selection of the most productive and loyal employees.

Accepted Answer

The differentiation of its products and the production of products at a lower average cost than competing firms are sustainable competitive advantages that can be controlled by the firm's owners and managers. Trademarks and lobbying government may provide temporary advantages, but they are not as controllable and sustainable as product differentiation and cost leadership. The selection of prices and employees are important factors, but they are not as crucial as product differentiation and cost leadership in achieving long-term success.

Question 10

If buyers of a monopolistically competitive product feel the products of different sellers have few differences between them, then the demand for each seller's product is relatively elastic.

Accepted Answer

If buyers feel the products of different sellers are similar, they are more likely to switch between sellers based on small differences in price or other factors, leading to a more elastic demand for each seller's product.

Question 11

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

Accepted Answer

Monopolistically competitive firms can use product differentiation to convince buyers that their product has unique value and stands out from competitors' products.

Question 12

How might a monopolistically competitive firm continually earn economic profit greater than zero?

Accepted Answer

The answer of How might a monopolistically competitive firm continually...

Question 13

A firm cannot control all of the factors that allow it to make economic profits. Which of the following is an example of an uncontrollable factor?
A) product differentiation
B) input prices
C) producing at a lower average total cost than competing firms
D) hiring competent managers

Accepted Answer

Input prices such as raw materials, labor costs, and energy costs are often determined by external factors such as market supply and demand, government policies, and natural disasters. A firm may be forced to pay higher input prices, reducing its economic profits, even if it produces efficiently and sells at a high price. Product differentiation, producing at a lower cost than competitors, and having competent managers can all be controlled or influenced by the firm's decisions and actions.

Question 14

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

Accepted Answer

The answer of What are the key factors that determine...

Question 15

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Accepted Answer

The answer of How would a marketing campaign directed at...

Quiz 10: Monopolistic Competition : The Competitive Model in More Realistic Setting

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

Being the first to sell a particular good can give a firm advantages over other firms that sell similar products. What is the name given to these advantages?

Some factors that allow firms to make economic profits are beyond its control. All but one of the following is an uncontrollable factor. Which factor is controllable?

Explain the significance of brand management to a firm that has differentiated its product. Comment specifically on the importance of obtaining a trademark.

The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

Which of the following statements is true?

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated. How do these problems affect the innovating firm?

In a monopolistically competitive market, a successful new restaurant

The most important of the factors that make a firm successful and that can be controlled by the firm's owners and managers are

If buyers of a monopolistically competitive product feel the products of different sellers have few differences between them, then the demand for each seller's product is relatively elastic.

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

How might a monopolistically competitive firm continually earn economic profit greater than zero?

A firm cannot control all of the factors that allow it to make economic profits. Which of the following is an example of an uncontrollable factor?

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?