1) Which of the following is an example of a vertical merger? A. Northern Illino
ID: 1173173 • Letter: 1
Question
1) Which of the following is an example of a vertical merger?
A. Northern Illinois University merging with McDonalds
B. Northern Illinois University merging with a training academy for new professors.
C. Northern Illinois University going from public to a private university.
D. Northern Illinois University merging with Roosevelt University.
2) Refer to the above figure. Suppose the government requires the natural monopolist to cahrge the efficient price. Then profits for the firm will be:
A. Profits equal to Q1 times distance a-b
B. losses equal to Q3 times distance d-e
C. losses equal to Q4 times distance f-g
D. zero
3) By reducint the product compatibility of iPod, Apple can lower the price elasticities of demand for
A. products by other firms that have positive network effects
B. Apple products that are complementary to the iPod
C. products that are not related to the iPod
D. Apple products that are substitutable to the iPod
4) Refer to the above figure. If the marginal cost curve shifts from MC1 to MC3 the firm will
A. continue to produce the same quantity and charge the same price
B. continue to produce the same quantity and increase the price
C. change the quantity produced and leave the price unchanged
D. change both the quantity produced and the price
5) Refer to the above figure. From the standpoint of society, the optimal output is
A. Q1
B. Q2
C. Q3
D. Q4
6) Sunil has decided not to purchase another can of Stosh becuase his friends laughed at him the last time he purchased some. Stosh is no longer a popular item. Sunil's action is known as
A. price-leadership
B. positive market feedback
C. negative market feedback
D. negative-sum game
7) Refer to the above table. The four firm concentration ratio is
A. 59.2%
B. 72.5%
C. 85.8%
D. 75%
8) Cab drivers operating from JFK airport to the City of New York legally must charge a specific fare. This is an example of
A. the market share test
B. the rate of return test
C. social regulation
D. economic regulation
9) In a monopolistically competitive market if the additional revenue generated from advertising equals the additional cost of advertising, the firm should
A. advertsise less to decrease costs
B. advertise more to increase sales
C. advertise more to lower marginal costs
D. maintain its current amount of advertising
10) The demand curve for monopolistically competitive firm is
A. elastic becuase of product differentiation
B. inelastic because of the profit maximizing behavior of the firm
C. elastic because the products produced are homogeneous
D. inelastic because of barriers to entry
11) Yummy foods, a gourmet food store, has stores all over the Chicago area. They have a reputation for undercutting prices of any competitor that tries to enter the market until the compeitior is driven out of business. Which of the following statements is true?
A. Yummy foods is engaging in overt collusion
B. Yummy foods is using the kinked-demand curve theory
C. Yummy foods entry deterrign strategy is to engage in a price war
D. Yummy foods is using price leadership along with the limit pricing model
12) Refer to the figure above. The payoff matrix shows all of the following EXCEPT
A. if one oligopolist chooses a high price and the other doesnt, the high priced firm makes $8 million
B. if both ologopolists choose a high price, each makes $6 million
C. if one chooses a low price and the other doesnt, the low priced firm will make $8 million
D. if they both choose a low price, each makes $4 million
13) In the figure above, if this natural monopolist were unregulated, the profit maximizing firm would produce
A. at Q1 output rate
B. past the Q3 output rate
C. at Q2 output rate
D. at Q3 output rate
14) Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a high price?
A. High price
B. Low price
C. No best strategy
D. Not enough info. is given to determine
15) In the above figure, total costs for this profit maximizing monopolistically competitive firm is
A. $70,000
B. $50,000
C. $72,000
D. $91,000
Which of the following is an example of a vertical merger? Northern Illinois University merging with McDonalds Northern Illinois University merging with a training academy for new professors. Northern Illinois University going from public to a private university. Northern Illinois University merging with Roosevelt University. Refer to the above figure. Suppose the government requires the natural monopolist to cahrge the efficient price. Then profits for the firm will be: Profits equal to Q1 times distance a-b losses equal to Q3 times distance d-e losses equal to Q4 times distance f-g zero By reducint the product compatibility of iPod, Apple can lower the price elasticities of demand for products by other firms that have positive network effects Apple products that are complementary to the iPod products that are not related to the iPod Apple products that are substitutable to the iPod Refer to the above figure. If the marginal cost curve shifts from MC1 to MC3 the firm will continue to produce the same quantity and charge the same price continue to produce the same quantity and increase the price change the quantity produced and leave the price unchanged change both the quantity produced and the price Refer to the above figure. From the standpoint of society, the optimal output is Q1 Q2 Q3 Q4 Sunil has decided not to purchase another can of Stosh becuase his friends laughed at him the last time he purchased some. Stosh is no longer a popular item. Sunil's action is known as price-leadership positive market feedback negative market feedback negative-sum game Refer to the above table. The four firm concentration ratio is 59.2% 72.5% 85.8% 75% Cab drivers operating from JFK airport to the City of New York legally must charge a specific fare. This is an example of the market share test the rate of return test social regulation economic regulation In a monopolistically competitive market if the additional revenue generated from advertising equals the additional cost of advertising, the firm should advertsise less to decrease costs advertise more to increase sales advertise more to lower marginal costs maintain its current amount of advertising The demand curve for monopolistically competitive firm is elastic becuase of product differentiation inelastic because of the profit maximizing behavior of the firm elastic because the products produced are homogeneous inelastic because of barriers to entry Yummy foods, a gourmet food store, has stores all over the Chicago area. They have a reputation for undercutting prices of any competitor that tries to enter the market until the compeitior is driven out of business. Which of the following statements is true? Yummy foods is engaging in overt collusion Yummy foods is using the kinked-demand curve theory Yummy foods entry deterrign strategy is to engage in a price war Yummy foods is using price leadership along with the limit pricing model Refer to the figure above. The payoff matrix shows all of the following EXCEPT if one oligopolist chooses a high price and the other doesnt, the high priced firm makes $8 million if both ologopolists choose a high price, each makes $6 million if one chooses a low price and the other doesnt, the low priced firm will make $8 million if they both choose a low price, each makes $4 million In the figure above, if this natural monopolist were unregulated, the profit maximizing firm would produce at Q1 output rate past the Q3 output rate at Q2 output rate at Q3 output rate Refer to the above figure. Ajax and Greenco are oligopolists. Above you are given the payoff matrix for the two firms giving the payoff associated with different pricing strategies. What is the best strategy for Greenco if Ajax decides on charging a high price? High price Low price No best strategy Not enough info. is given to determine In the above figure, total costs for this profit maximizing monopolistically competitive firm is $70,000 $50,000 $72,000 $91,000Explanation / Answer
1)D
In economics vertical merging means merging with other firms or industries that are related to same field and horizontal is with different fields, vertical merging is useful for growth in same field whereas horizontal is for diversification
2)D
For efficiency price should be fixed at the demand=supply point and for monopoly the supply curve is same as the AC curve so when price is set at average cost of production the profit willbe zero
3)B
This is related to the concept of cross elasticity of demand now if price of x increases and the demand of y increases these can be substitutable now if compatibility decreases and if pricesof ipod are changed then demand for complementary goods decreases so the effect is on complementary goods
4)D
If MC shifts from MC1 to MC3 then the price of the firm increases as the price is at which it intersects MR curve and the quantity at that price is reduced
5)C
From the stand point of society means when the company achieves efficiency where the price set for the welfare of people and market stays at equilibrium so demand=supply which is true for Q3
6)C
Because the sales of product are diminishing because of the customer dissatisfation it is known as negativemarket feedback
7)A
the concentration ratio is that the sum of sales of that four companies to sum of sales of remainning companies
8)C
Because it is in the interest of passengers not to be fooled by cab drivers because many may be new to the city this is social regulation
9)D
Here the advertisement elasticity of demand is 1 now if firm advertise less then it may cause loss due to less revenueand more cost and if it is more then also thecost may nbe more and loss occurs so it has to maintain current amount of advertising as it is not causing any loss while not generating profit
10)C
if price increases then demand decreases because there are other companies with similar product and lesser price
11)B
In kinked demand the price varies while the demand remains same so the firm is using this to maintain demand with lesser price to drive competitor away
12)C
if one firm chooses low and other doesn't means it is high and in this case low price firm make 2M and high price firm make 8M
13)A
because profit maximization occurs when MC=MR
14)B
If ajax charges high price then greenco makes 2M at high price and 7M at low price
15)A
For profit max MR=MC which is at 10000 output and this intersects ATC at 7 so total cost is 7
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