Multiple Choice
A new product often has a high price when it is launched because of a:
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Buyers are in a position to exert strong bargaining power in dealing with sellers when:
A
the supply of the product is very limited
B
the product is highly differentiated and unique
C
there are many sellers offering similar products
D
buyers have limited information about prices
Verified step by step guidance1
Understand the concept of buyer bargaining power: Buyers have strong bargaining power when they can influence the price or terms of purchase in their favor.
Analyze each option in terms of how it affects buyer power:
1. If the supply of the product is very limited, sellers have more control, so buyer power is weak.
2. If the product is highly differentiated and unique, sellers have more power because buyers cannot easily switch to alternatives.
3. If there are many sellers offering similar products, buyers can easily switch between sellers, increasing their bargaining power.
4. If buyers have limited information about prices, their ability to negotiate effectively is reduced, weakening their bargaining power.
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