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Competitive Markets quiz #3

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  • Why would a business use a shallow product mix?
    To focus on a few products and reduce costs.
  • What method of mass production increased the supply and reduced the cost of the automobile?
    The assembly line.
  • Who are the two main players in a market?
    Buyers and sellers.
  • What happens in an increasing-cost perfectly competitive industry as output increases?
    As output increases, costs rise and prices may increase.
  • What characterizes perfectly competitive markets?
    Perfectly competitive markets have many buyers and sellers and identical products.
  • Why is the price system an efficient way to allocate resources?
    It matches supply and demand, ensuring resources go to their most valued uses.
  • How do businesses determine which products to make or sell?
    Market research and analysis.
  • Why might a business avoid a price matching strategy?
    It can lead to lower profits if competitors have lower costs.
  • What best describes pure competition?
    Many sellers offer identical products and are price takers.
  • Which form of competition drives production decisions in a market-based economy?
    Pure competition.
  • What happens to costs and prices in a decreasing-cost perfectly competitive industry as output increases?
    As output increases, costs fall and prices may decrease.
  • What are the four conditions of a purely competitive market?
    Many buyers, many sellers, identical products, and free entry/exit.
  • Which activity most likely takes place in a business market?
    Buying and selling goods for resale.
  • Which is most likely the result of healthy competition in the market?
    Lower prices and better products for consumers.
  • What kind of market structure does this pie graph illustrate?
    If many small firms are shown, it illustrates perfect competition.
  • Why must perfectly competitive markets always deal in commodities?
    Commodities are identical and allow for price-taking behavior.
  • Why are stores such as Toys R Us and IKEA known as category killers?
    They dominate a product category and reduce competition.
  • Which of these is a criterion used in forming market segments?
    Similarity in consumer needs.
  • Why does a perfectly competitive market require many participants as both buyers and sellers?
    To ensure no single participant can influence the price.
  • What is an example of competition in a market?
    Two firms selling identical products to the same market.
  • What helps retailers to be successful with the buy-online/pick-up-in-store option?
    Efficient inventory management.
  • What type of goods are typically produced under a make-to-order approach?
    Customized products.
  • What is the result of low barriers to entry in the airline industry?
    More firms enter, increasing competition and lowering prices.
  • Expansion of competitive boundaries which allows customers many choices is called a:
    Market expansion.
  • When a producer chooses a channel strategy that does not involve any intermediaries, they are using:
    Direct distribution.
  • Under competitive pricing, companies set their prices close to those of their major competitors.
    True.
  • Successful differentiation allows a firm to
    Charge higher prices and attract specific customer segments.
  • Rivalry among competing sellers decreases when
    There are fewer firms or products are differentiated.
  • Economic profit creates an incentive for other perfectly competitive firms to enter the market.
    True.
  • Consumers and sellers create a market where goods and services are exchanged.
    True.
  • A group of companies that deal with more or less the same set of suppliers and buyers make up
    An industry.
  • A market penetration strategy attempts to increase sales of present products among
    Existing customers.
  • Manufacturers make products and sell them to wholesalers, who resell the merchandise to retailers.
    True.
  • By using a differentiation strategy, a firm aims to
    Make its product stand out from competitors.
  • A company's product market includes
    All buyers and sellers of its product.
  • In which market structure are no substitutes readily available?
    Monopoly.
  • The strength or weakness of the potential entry of rivals as a competitive force is
    Determined by barriers to entry.
  • Competitive pressures
    Increase as more firms enter and products become more similar.
  • A competitive advantage becomes a sustainable competitive advantage when
    It cannot be easily copied by competitors.