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Competitive Markets quiz #2

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  • What is a price taker? Part 2: A price taker is
    A firm or individual that must accept the market price and cannot influence it.
  • What is true under conditions of pure competition?
    Firms sell identical products and cannot set prices.
  • Who of the following is a price taker?
    A wheat farmer in a large agricultural market.
  • What is the profit-maximizing quantity when price is \$20?
    The quantity where marginal cost equals \$20.
  • Which of these could be an example of a competitive advantage?
    Lower production costs than competitors.
  • What is the correct expression for a competitive firm regarding marginal revenue?
    Marginal revenue equals market price.
  • Why don’t firms in a competitive market have excess capacity in the long run?
    Because firms enter and exit until only efficient producers remain.
  • Which market is most likely to be a competitive market?
    The market for foreign exchange.
  • What best describes a price-taking firm?
    The firm accepts the market price and sells as much as it wants at that price.
  • What is true about Max's thrift store selling second hand clothing in terms of market competition?
    Max likely faces some product differentiation and is not in a perfectly competitive market.
  • What is a characteristic of a product-market?
    A group of buyers and sellers for a specific product.
  • Which two of the following factors are part of the competitive environment for a fast food chain?
    Number of competitors and product differentiation.
  • When does competition increase in a market?
    Competition increases when more firms offer similar products.
  • In the market for compound bows, what type of competition is present?
    Likely monopolistic competition due to product differentiation.
  • What is a feature of a purely competitive market?
    Identical products.
  • Throughout the simulation new companies will eventually enter the market. True or false?
    True.
  • Which market is most likely to be considered a competitive market?
    The spice market in Morocco.
  • What is a decision an organization is most likely to make at the functional level?
    How to allocate resources for production.
  • The market for which item generally involves pure competition? Cola, corn, jeans, ice cream.
    Corn.
  • How does a free market encourage competition?
    By allowing entry and exit of firms and letting prices be set by supply and demand.
  • Why was Carnegie Steel able to offer its product more cheaply than its competitors?
    It achieved lower production costs.
  • What is an example of competing on low-cost leadership?
    Offering products at a lower price than competitors due to efficient production.
  • Which slogan most likely reflects a price competition strategy by the company using it?
    "Lowest prices guaranteed!"
  • What is probably the easiest test of competitive advantage to pass?
    Offering lower prices than competitors.
  • How does competition affect the prices that airlines charge for fares?
    Competition tends to lower prices.
  • The market portfolio has which of these characteristics?
    It includes a variety of assets from different markets.
  • Which market includes wholesalers or retailers?
    The product market.
  • Which situation best illustrates a business increasing its productivity?
    Producing more output with the same input.
  • When is price competition among products strongest?
    Price competition is strongest when products are identical.
  • What does a supply chain map show?
    It shows the flow of goods from suppliers to consumers.
  • Which type of competitors are a store that sells books and a store that sells tools?
    Indirect competitors.
  • Which situation describes a pure competition market structure?
    Many sellers offering identical products.
  • Why do single firms in perfectly competitive markets face horizontal demand curves?
    Because they can sell any quantity at the market price.
  • How does the entry of new coffeehouses affect the profits of existing coffeehouses?
    It increases competition and reduces profits.
  • Which set of markets includes all purely competitive markets?
    Agricultural products, foreign exchange, and spice markets.
  • What is an important feature of a market economy?
    Prices are determined by supply and demand.
  • Why might a company not want to increase its market share?
    It may reduce profit margins due to increased competition.