1.In monopolistic competition

a.The average revenue is always equal to the price.

b.The average revenue is never equal to the price.

c.The average cost is equal to the price.

d.None of the above

2.In a perfectly competitive firm, the additional revenue from selling one more unit is equal to the price. This is not true for a firm that is the dominant firm in a monopolistic competitive industry, like Starbucks. To sell another cup of coffee it has to lower the price and

a.They sell more coffee - the output effect.

b.They receive less revenue for each additional sale - the price effect.

c.They raise inventory - the tax effect.

d.Only a and b

3.All firms maximize their profits where

a.Marginal revenues equal marginal sales

b.Marginal costs equal marginal sales

c.Marginal Revenues equal marginal costs

d.Marginal profits equal marginal costs

4.When a firm's total revenues covers covers all of its costs plus its opportunity costs, they have made

a.A total profit

b.An economic profit

c.A net profit

d.A gross profit

5.If a new firm opens near a monopolistically competitive firm, its demand curve will

a.Move to the left since it will sell fewer products.

b.Move to the right since it will sell more products.

c.Will not move since it won't affect sales.

d.None of the above.

6.A zero economic profit is possible in the long-run

a.If the firm innovated and makes a product that it different from its competitors.

b.If the new firm does not make it and leaves the market.

c.If the firm fails to find new ways to differentiate their product or fails to lower production costs.

d.All of the above.

7.Compared to perfect competition, consumers benefit from monopolistic competition because

a.Products are differentiated from those of competitors.

b.Products are identical in monopolistic competition.

c.Products are cheaper in monopolistic competition.

d.All of the above.

8.Differentiating a product means trying to maintain the difference over time by using

a.Brand management

b.Copyrights

c.Patents

d.All the above

9.Establishing the brand in the market as the dominant product is often done by using

a.A profit strategy

b.A trademark

c.A modern accounting technology system

d.A modern management system

10.The goal of advertising is to

a.Get an adequate return on the investment made in the advertising program.

b.Shift the demand curve to the right and make it more inelastic.

c.Share of mind

d.All the above

e.Only a and c

11.Price discrimination refers to

a.Predatory pricing policies that sell products at inflated prices to those who have no other choices.

b.Keeping prices the same for everyone.

c.Charging higher prices to some customers and lower prices to others.

d.None of the above

12.If a product sells for different prices in different places, anyone living in one area with lower prices could buy the product and sell it in the other area at a higher price and make a profit. This practice is called

a.Profiteering

b.Fraud

c.Arbitrage

d.Unfair pricing

13.Why don't firms all charge the same price?

a.New sellers have to get new business as well as establish a reputation before they can compete on equal footing.

b.Competing in a market requires it.

c.Collusion

d.All the above

e.Only a and b

14.In order for a firm to sell the same product at different prices

a.Market power is not required.

b.Customers have the same need for the product.

c.Customers can buy and transport the product to other areas

d.All of the above

e.None of the above

15.Charging more for evening movies than afternoon movies

a.Is a profit-maximizing strategy.

b.Is not a profit maximizing strategy since you are charging less than you could at some times of the day.

c.While it does not maximize profits, it raises the average profit per movie.

d.Profit maximization is not the goal; product differentiation is the goal.

16.What gives airlines strong a strong incentive to manage prices?

a.Seats are a perishable product.

b.The marginal cost of flying an additional passenger is near zero.

c.Business flyers have less flexibility than leisure flyers.

d.All the above

e.Only a and c

17.Who helps fill seats on early morning flights for airlines?

a.Priceline

b.Orbitz

c.First-time flyers

d.All the above

e.Only a and b

18.What eliminates consumer surplus?

a.Perfectly competitive markets

b.Perfect Price Discrimination

c.Monopolies

d.Oligopolies

19.Which customer requires a company to use more flexibility in pricing strategy?

a.Business flyers

b.Early adopters

c.Late adopters

d.All the above

20.The use of which one of the following strategies has expanded because it works?

a.Odd pricing

b.Cost-plus pricing

c.Two-part tariffs

d.All of the above

21.If economic profits are negative, the demand curve for a monopolistically competitive firm

a.Will shift to the right as firms leave the market and more of the firm's products are sold due to less competition.

b.There will be no change in the number of products the firm will sell.

c.There will be fewer products sold by the firm with less competition in the market.

d.All of the above

22.Any firm has to offer customers goods or services

a.That customers perceive have less value than those of competitors.

b.That customers perceive have greater value than those of competitors.

c.That customers perceive have the same value as those of competitors.

d.Both a and c

23.Brand management includes

a.Formation of the company or corporation.

b.Accounting systems

c.Product design

d.How to distribute the product.

e.All the above

f.Only c and d

24.Airlines are

a.Generally unwilling to lower the fare for seats they don't expect to fill.

b.Generally likely to raise the price on seats on a plane ready to depart the gate since people may need to catch the flight.

c.Generally willing to lower the fare for seats they don't expect to fill.

d.Use the cost-plus pricing method.

25.When Disney used the two-part tariff in their theme parks

a.They had one price to get in and then all rides were no additional cost.

b.They had one price to get in and then people had to pay another price for rides.

c.They had a monopoly and parents felt pressure from their children.

d.All the above

e.Only b and c

26.Briefly describe odd pricing. Does it work?

Odd Pricing is a pricing method aimed at maximizing profit by making micro-adjustments in pricing structure. Yes, it does work because for example, a $20 item marked $19.99 is perceived as cheaper because the number is still in the teens rank.