Question 2 In a perfectly competitive industry if the existing firms are making
ID: 1126543 • Letter: Q
Question
Question 2
In a perfectly competitive industry if the existing firms are making excess profits, then:
New competitors will enter until the existing firms start losing money.
Some of the existing firms will exit and profits will be pushed down to the normal level.
New competitors will enter and profits will be pushed down to the normal level.
Some of the existing firms will exit and the remaining firms start losing money.
New competitors will enter and the profits of the existing firms will soar.C
1 points
Question 3
Horizontal product differentiation means:
Firms create new varieties of their product at the same price and quality level.
Firms create new varieties of their product at different price and quality levels.
Firms create new products that are technically superior to the products of their competitors.
Firms create new products that have superior features compared to the products of their competitors.
Firms create new varieties of their product different price but same quality level.
1 points
Question 4
Vertical product differentiation means:
Firms create new varieties of their product at the same price and quality level.
Firms create new varieties of their product at different price and quality levels.
Firms create new products that are technically superior to the products of their competitors.
Firms create new products that have superior features compared to the products of their competitors.
Firms create new varieties of their product different price but same quality level.
1 points
Question 5
An example of price discrimination is when:
A law firm charges its best corporate customers a lower price for its legal services.
A restaurant charges less for a Hamburger Deluxe-- a burger with fries--than the same two items cost if they are purchased separately.
A printer company deliberately breaks the color feature on its new printer to be able to sell a cheaper black ink-only printer.
A rural doctor charges her customers different prices for checkups based on their willingness to pay.
A bank charges different interest rates on its loans based on the perceived risk of the borrower.
1 points
Question 6
An example of bundling is when:
A law firm charges its best corporate customers a lower price for its legal services.
A restaurant charges less for a Hamburger Deluxe-- a burger with fries--than the same two items cost if they are purchased separately.
A printer company deliberately breaks the color feature on its new printer to be able to sell a cheaper black ink-only printer.
A rural doctor charges her customers different prices for checkups based on their willingness to pay.
A bank charges different interest rates on its loans based on the perceived risk of the borrower.
New competitors will enter until the existing firms start losing money.
Some of the existing firms will exit and profits will be pushed down to the normal level.
New competitors will enter and profits will be pushed down to the normal level.
Some of the existing firms will exit and the remaining firms start losing money.
New competitors will enter and the profits of the existing firms will soar.C
Explanation / Answer
2.If firms are making excess profits then new firms would be attracted and they will also enter the industry.New competitors will enter.This will increase supply and reduce price.The new competitors will continue entering till the industry starts making zero profits.
Answer-C
3.Horizontal differentiation refers to distinctions in products that cannot be easily evaluated in terms of quality. This stands in contrast to vertical differentiation, where the distinctions between products are objectively measurable and are based in the products' respective level of quality. Horizontally differentiated products vary only marginally, as it's more efficient for producers to try to capture as many new consumers as possible with minimal additional costs. While horizontally differentiated products tend to command similar prices at equilibrium, the lack of relationship to quality does not necessarily imply that they cost the same -- two products may be virtually identical in all considerations except for color or flavor and still be offered at totally different prices.The price and quality level is only marginally different.
Answer-A.
4.Answer-B.
5.D
Price discrimination is a pricing strategy that charges customers different prices for the same product or service. In pure price discrimination, the seller charges each customer the maximum price that he is willing to pay. In more common forms of price discrimination, the seller places customers in groups based on certain attributes and charges each group a different price.
6.B.
Bundling is a marketing strategy that joins products or services together in order to sell them as a single combined unit. Bundling allows the convenient purchase of several products and/or services from one company
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