Question 1

A firm acquires a substitute product by merging with another company, and does not want to reduce sales of its existing product.To prevent increased sales of one product costing the firm reduced sales of the new product, the firm should

A. set both prices equal

B. reposition a product so it does not directly compete with the other product

C. increase output until marginal revenue is greater than the marginal cost of production

D. lower both prices, but lower price more for the good with more inelastic demand

Question 2

OverArmour produces shoes and has decided to acquire a company that makes shoelaces.Because shoes and shoelaces are complements, demand for both goods will be

A. more elastic than the individual demands

B. indifferent to elasticity

C. less elastic than the individual demands

D. equal to the average of the individual elasticities

Question 3

Two companies merged, then raised prices of the products they sell.One can conclude that the goods were

A. highly price elastic

B. unrelated

C. complements

D. substitutes

Question 4

For products like parking lots and hotels, costs of building capacity are mostly fixed or sunk, and firms in such an industry typically face capacity constraints.If these fixed sunk costs are large, then short run marginal cost is significantly lower than long run marginal cost, and a profit maximizing firm should

Group of answer choices

A. set price below short run marginal cost to fill capacity

B. set price below long run marginal cost but above short run marginal cost to fill capacity

C. set price equal to the long run marginal cost to cover all of the firm's fixed costs

D. set price above long run marginal cost so some capacity is not used

Q 5. After running a promotional campaign, the owners of a local shoe store decided to increase the prices of shoes sold in their store.One can infer that

A. the promotional expenditures made demand for shoes more elastic

B. demand for shoes is not affected by elasticity

C. the owners make a mistake - to maximize profits, advertising promotions should be accompanied with price reductions

D. the promotional expenditures made demand for shoes more inelastic