1. Buyers consider nails and lumber to be 6.

Which of the coefficient points out that

complements. If nails just increased its total revenue will increase if you sell one
prices, what would you expect to occur in more. 
the lumber market?  
MR > MC 
Demand would rise, and lumber would reduce price. MR > 0 
Demand would fall, and lumber would reduce MR < MC  
price. MR < 0
Demand would rise, and lumberwould increase 7. Jim recently graduated from college. His
supply.  income increased tremendously from
Demand would fall, and lumberwould increase price. $5,000 a year to $60,000 a year. Jim
2. It’s lunch time, you are hungry and you decided that instead of renting he will buy
would like to have some pizza.  By the law a house. This implies that
of diminishing marginal value,
You would pay an equal amount of money for both  houses are normal goods for Jim.
the slices since they are identical.  need information on the price of houses.
You would pay more for your first slice of pizza
than your second   houses are inferior goods for Jim. 
None of these renting and owning are complementary for Jim.
You would pay more for your second slice of pizza 8. An economist estimated the cross-price
than your first. elasticity for peanut butter and jelly to be
3. Demand is elastic if 1.5. Based on this information, we know the
goods are
|e| > 1 
|e| = 1   inferior goods.
|e| < 1 
 substitutes.
|e| ≠ 1
4. Which of the following is not the factor inelastic. 
that make demand more elastic complements.
 Demand for brands is more elastic than industry 9. Pricing is an extent decision. Decrease
demand. price if
 In the long run, demand becomes more elastic MR ≠ MC 
 Products with close substitutes have more elastic MR > MC
demand. MR = MC 
 As price decreases, demand becomes more elastic. MR < MC
( increases ) 10. Which of the coefficient points out that
total profit will increase if you sell one
5. Jim has estimated elasticity of demand for more.
gasoline to be -0.7 in the short-run and -1.8
in the long run.  A decrease in taxes on  MR < MC 
gasoline would:
MR < 1
 lower revenue in both the short and long run.  MR > MC 
 raise tax revenue in the short run but lower tax MR > 0
revenue in the long run. 
11. Which of the following statement is false?
raise revenue in both the short and long run.
Lower revenue in the short run but raise revenue Inferior goods:  demand decreases as income
in the long run. increases.
complement goods:  demand increases  as the price of
a complement increases.
substitute goods:  demand decreases  as the price of a
substitute decreases,  Average costs will increase
normal goods:   demand increases (decreases) as
income increases,
12. Which of the following goods has a negative
income elasticity of demand?
 Items from Dollar stores.
 Cars
 Bread  18. A security system company’s total production
Shoes
13. Christine has purchased five bananas and is
considering the purchase of a sixth.  It is likely she
will purchase the sixth banana if     a false statement?
the average value of the sixth bananas exceeds the
price.
the marginal benefit of the sixth banana exceeds
its price.
the total personal value of six bananas exceeds the
total expenditure to purchase six bananas. 
the marginal value she gets from the sixth banana is
lower than its price.
14. If long-run average costs are constant with
respect to output, then you have constant returns
to scale.  If long run average costs rise with
output, you have increasing returns to scale.
(decreasing)
 Both statements are false.
 The first statement is true and the second
statement is false.
 The first statement is false and the second statement
is true. 
Both statements are true.
15. Average costs curves initially fall
due to declining average fixed costs. 
due to rising average fixed costs .
due to rising marginal costs.
due to declining accounting costs.
16. Once marginal cost rises above average cost,
Average costs are unaffectedCorrect!
None of the above
Average costs will decrease
17. What might you reasonably expect of an
industry in which firms tend to have economies of
scale?
Exceptional competition among firms . 
Highly diversified firms . 
A large number of firms .
A small number of firms.
costs depend on the number of systems produced
according to the following equation: Total Costs =
$20,000,000 + $4000 * quantity produced.  Given
these data, which of the following is
  
There are diseconomies of scale .
A firm that produces a larger output has a cost
advantage over a smaller firm.
There are economies of scale.
There are fixed costs associated with this business.
19.It costs a firm $90 per unit to produce product
A and $70 per unit to produce product B
individually. If the firm can produce both
products together at $175 per unit of product A
and B, this exhibits signs of
economies of scope
diseconomies of scale
economies of scale
diseconomies of scope
20. As a golf club production company produces
more clubs, the average total cost of each club
produced decreases. This is because:
average variable cost is decreasing as more clubs are
produced . 
total variable cost is decreasing as more clubs are
produced.
there are scale economies.
total fixed costs are decreasing as more clubs are
produced .
21.Learning curves mean that current production decreasing marginal costs
lowers future costs. It’s important to look over the
life cycle of a product when working with 26. When the demand of a product is elastic to
products characterized by learning curves. increase the revenue is to decrease the price
because  the increase in quantity is bigger than
The first statement is true and the second statement is the decrease in price.
false.
The first statement is false and the second statement True
is true. False
Both statements are true.
Both statements are false. 27. Assuming other factors are held constant
22.According to the law of diminishing marginal consumers purchase less as price increases
returns, marginal returns:
True
diminish constantly. False
diminish always prior to increasing.
diminish eventually. 28. If demand is elastic, price cuts increase
diminish never. revenue.
23. Diminishing marginal returns causes True
marginal productivity to decline. Diminishing False
marginal productivity causes  marginal costs to
increase. 29. The term aggregate demand is not the same or
different from market demand. (same)
 The first statement is false and the second statement
is true. True
False
 The first statement is true and the second statement
30. Consumers make consumption decisions using
is false.
marginal analysis, consume more if marginal
 Both statements are true. value is less than the price (more than)
 Both statements are false True 
24. As a T-shirt making company producing T- False
shirts, the average total cost of each T-shirts
produced increases. This is because: 31. “Demand is elastic” in business vernacular it
often means the the price is too low. (high)
average variable cost is decreasing as more T-shirts
are produced. True
total fixed costs are increasing as T-shirts are False
produced. 32. Estimated price elasticity is used to estimate
total variable cost is decreasing as more T-shirts are demand from a price and quantity change.
produced.
True
There is a diseconomies of scale. False

25 Microsoft found that instead of producing a 33. The marginal value of consuming each
DVD player and a gaming system separately, it is subsequent unit diminishes the more you consume
cheaper to incorporate DVD playing capabilities
in its new version of the gaming system. Microsoft True
is taking advantage of False

learning curve
economies of scale
economies of scope
34. Marginal analysis finds the profit increasing
solution to the pricing tradeoff.It tells you which
direction to go whether to raise or lower price,
and also tells you how far to go ( but do not )
True
False
35.In business investments if you hear the words
“efficiency” or “synergy,” hold on to your money.
True
False
36.Increasing marginal costs eventually cause
increasing average costs and make it easier
to compute break-even prices. (difficult)
True 
False
37.If average cost increases with output, then you
have increasing returns to scale. (decreasing)
True
False
38.If the cost of producing two outputs jointly is
less than the cost of producing them
separately then there are diseconomies of scope
between the two products. (economies)
True
False
39.Economies of scope between the two products
can be an important source of competitive
advantage and shape acquisition strategy.  Income
True 
False
 
40.The law of diminishing marginal returns states
that as you expand output, your marginal  $5, $4}. Assuming there are no transactions costs,
productivity eventually declines.
True
False
 
Chapter 8-9 Market Structure
The following are controllable factors  that can
affect demand, except
distribution speed
warranties
prices of substitute also owned by the company
prices of substitutes owned by other companies
The following dimensions help the firm to define
market before making investment, except
Time
Product
Location
Amount of capital
The price of peanuts increases. At the same time,
we see the price of jelly (which is often consumed
with peanut butter) rise. How does this affect the
market for peanut butter?
The demand curve will shift to the left; the supply
curve will shift to the right.
The demand curve will shift to the right; the supply
curve will shift to the left .
The demand curve will shift to the left; the supply
curve will shift to the left.
The demand curve will shift to the right; the supply
curve will shift to the right
 
The following are the uncontrollable factors  that
can cause demand  shift, except
prices of complementary products owned by other
companies
advertising
interest rates
Suppose there are seven sellers and seven buyers
in a competitive market, each willing to buy or sell
one unit of a good, with values {$10, $9, $8, $7, $6,
what is the equilibrium price in this market?
$5
$7
$6
$8
Suppose there are seven sellers and seven buyers
in a competitive market, each willing to buy or sell
one unit of a good, with values {$10, $9, $8, $7, $6,
$5, $4}.  If the government imposes a price floor at
$8 in the above market, how many goods will be
traded?
Four
Five
Three
Two
 
Suppose there are seven sellers and seven buyers
in a competitive market, each willing to buy or sell
one unit of a good, with values { $9, $8, $7, $6, $5,
$4, $3}.  If the government imposes a price ceiling
at $7 in the above market, how many goods will be
traded?
Two
Four
Five
Three
Suppose there are six sellers and six buyers in a
competitive market, each willing to buy or sell two
units of a good, with values { $8, $7, $6, $5, $4,
$3}.  If the government imposes a price floor at $6
in the above market, how many goods will be
traded?
 Six
Eight
Three
Four
Suppose a recent and widely circulated medical
article has reported new benefits of cycling for
exercise. Simultaneously, the price of the parts
needed to make bikes falls.  If the change in
supply is greater than the change in demand, the
price will _________ and the quantity will
_________.
fall, fall
fall, rise
rise, fall
rise, rise
If the market for a certain product experiences an
increase in supply and a decrease in demand,
which of the following results is expected to occur?
The equilibrium price would rise, and the equilibrium
quantity could rise or fall.
The equilibrium price would fall, and the equilibrium
quantity would fall.
Both the equilibrium price and the equilibrium
quantity could rise or fall.
The equilibrium price would fall, and the
equilibrium quantity could rise or fall.
A competitive firm’s profit maximizing price is
$15. At MC=MR, the output is 100 units. At this
level of production, average total costs are $12.
The firm’s profits are
$300 in the short run and long run
$500 in the short-run and zero in the long run
$500 in the short-run and long-run
$300 in the short-run and zero in the long run
 
The following are attributes of monopoly firms
that protect them from the forces of competition,
except
They dominates the entire market.
they have no rivals
there are barriers to entry, so no other firms can enter
the industry.
they produce diversified products or service
What would happen to revenues if a firm in a
perfectly competitive industry raised prices?
They would increase
They would increase but profit would decrease
They would fall to zero
They would increase along with profit
What is the main difference between a competitive
firm and a monopoly firm?
Monopoly firms can generally earn positive profits
over a longer period of time.
Monopoly firms enjoy government protection from
competition.
Monopoly firms are more efficient and therefore have
lower costs.
The number of customers served by the firm
In the long-run, which of the following outcomes is Both a perfectly competitive firm and a monopoly
most likely for a firm?   A perfectly competitive firm but not a monopoly
A monopoly but not a perfectly competitive firm
Positive accounting profits and positive economic Neither a perfectly competitive firm nor a
profits monopoly
Zero accounting profits  
Zero economic profits but positive accounting
profits Which of the products below is closest to
Zero accounting profits but positive economic profit operating in a perfectly competitive industry?

If a firm in a perfectly competitive industry is Mang  Inasal's  Chicken

experiencing average revenues greater than Restaurants
average costs, in the long-run Nike shoes
Carrots
some firms will enter the industry and price will rise  
some firms will enter the industry and price will
fall At the individual firm level, which of the following
some firms will leave the industry and price will fall types of firms faces a downward-sloping demand
some firms will leave the industry and price will rise curve?
A perfectly competitive firm but not a monopoly firm
A competitive firm can earn positive or negative
Both a perfectly competitive firm and a monopoly
profit in the short run until entry or exit occurs.
firm
In the long run, competitive firms are condemned
Neither a perfectly competitive firm nor a monopoly
to earn only an low rate of return.
firm
Both statements are true. A monopoly firm but not a perfectly competitive
The first statement is true and the second firm
statement is false.  
Both statements are false.
A firm in a perfectly competitive market  faces
The first statement is false and the second statement
what type of demand curve?
is true.
Perfectly inelastic
The following items are the characteristics of a
None of these
competitive firm, except
Unit elastic
many rivals and no cost advantage over them Perfectly elastic .
has no barriers to entry or exit.  
produce a product or service with no substitute
one that cannot affect price. Which of the following items does not cause entry
  barrier of a firm?
low capital requirement
A sudden decrease in the market demand in a
none of these
competitive industry leads to
complex technology,
above average profits in the short-run and average large firm’s economies of scale
profits in the long-run  
losses in the short-run and average profits in the
long-run Which of the following market structure has the
demand creating supply highest level of market power?
new firms being attracted to the industry Monopoly
  Monopolistic competition
Which of the following types of firms are Perfect competition
guaranteed to make positive economic profit? Oligopoly
Which of the following describes the features of Which of the following items is the product that
perfect competition monopolistic competition engaged in?
large number of buyers and sellers, engaged in Trucks
homogeneous products. Men’s Shoes
large number of buyers and sellers, engaged in Fruits
heterogeneous products. Salt
there is barrier in entry and exit to the market.
few number of sellers, engaged in homogeneous or The following are features of monopoly.
differentiated products.
maximizes profit
all of these
Which of the following describes the features of
dominates the entire market
monopolistic competition?
high barriers to entry and exit
there is no barrier in entry and exit to the market,
engaged identical products The following are features of oligopoly, except
there is barrier in entry and exit to the market, engage
there are high barriers to entry and engage in
in one single products
heterogeneous product.
there is barrier in entry and exit to the market, engage Interdependence and lack of uniformity.
in differentiated products there are high barriers to entry and engage in one
there is no barrier in entry and exit to the market, single product.
engaged in differentiated products selling the homogeneous or differentiated products.
   
 A market structure with no direct competition A “market maker” makes a market – by buying
between rivals? low and selling high. 
Monopoly
Oligopoly True
Monopolistic competition False
Perfect competition  
Setting a single price for a single product of a
Which of the following characterize monopolistic
single firm is referred to as a “monopoly” model
competition?
of pricing.  
A firm that controls the entire market.
None of these. True
Engage in differentiated products with high barriers False
in entry and exit.
sell identically the same products at a single price. If the costs of making a market are large, then the
  equilibrium price may be better viewed as
A market structure with high barriers to entry a spread rather than a single price.
and exit and dominates the entire market. True
Pure competition False
Monopolistic competition
Oligopoly If price is below the equilibrium price, there are
Monopoly too many sellers, forcing price down.
 
True
False
 
Prices are a primary way that market participants that is, no matter where it goes it will make the no
communicate with one another. High prices profit
tell suppliers to supply less.
True
True False
False

Quantities are a primary way that market Perfect competition is theoretical, but
participants communicate with one another. benchmarking on it is valuable to expose the
forces that move prices and firm profit in the long
True run .
False
  True
False
The behavior of sellers is determined by a
“demand” curve. A competitive firm produces a product or service
with very close substitutes so they have
True very elastic demand.
False
  True
False
It is highly recommended to  use demand and  
supply analysis for an individual firm Profit exhibits what is called mean reversion, or
“regression toward the mean.”
True
False True
  False
In a competitive equilibrium there are no
consummated wealth-creating transactions. Without continuing stream of innovations and
brand support, the product’s profits would
True
have been slowly eroded away by the forces of
False competition.
True
Risk premia are analogous to compensating wage
False
differentials: just as workers are compensated for
unpleasant work, so too are investors
compensated for bearing risk. For competitive firms price is always greater than
marginal revenue.
True
True
False
False
 
Compensating wage differentials reflect
Sometimes price taking behavior of a competitive
differences in the inherent attractiveness of
firm means that the marginal revenue of another
various professions.
unit is equal to the price.  
True
True
False
False
 
 
If an asset is mobile, then in long-run equilibrium,
the asset will be indifferent about where it is used;
No industry is perfectly competitive thus few firms The oligopoly market structure lies between the
are almost close to it. pure monopoly and pure competition,
True True
False
False
When risk premia become too small, some   
investors view this as a time to get out of risky
In monopolistic competition there is an intense
assets because the market may be ignoring risk in
competition among the firms, the entity incurring
the pursuit of higher returns
the loss cannot easily move out of the industry at
True any time it wants.
False
True
False
The indifference principle tells us that in long-run
 
equilibrium, all professions should be
equally attractive, provided labor is mobile. The monopolistic competition is also called as
imperfect competition because this market
True
structure lies between the pure monopoly and the
Fals
pure oligopoly competition.
 
True
Competitive firms, cannot affect price; they can
False
choose how many quantities to produce and
sell all they want at a very competitive price.
Under the perfect competition, a seller is the price
True
maker and can influence the market price.
False 
True
The monopolistic competition, is a market
False
structure with  a large number of firms that
 
produce differentiated products which are not
close substitutes for each other. The oligopoly market is characterized by few
sellers, selling the homogeneous or
True
differentiated products.
False
True
Monopolistic competition refers to a market False
structure, where a large number of small firms
compete against each other with differentiated  
products. Product variation means that firms operating
under the monopolistic competition produces
True the product which is not identical from each other.
False
The Oligopoly firms producing the homogeneous True
products are called as Imperfect Oligopoly False
 
True
False
A monopoly refers to a market structure where a
single firm controls the entire market.  
True
False
 Chapter 10-12
1.Buyers have higher power when
they are not a significant purchaser of their supplier's
output.
switching costs are low.
their suppliers sell a highly differentiated product.
the buyer industry is highly fragmented
 
2. Attractive industries have all the following,
except
high supplier power
low buyer power
low rivalry
high entry barriers
 
3. Which of the following is NOT an example of an
entry barrier?
Low capital requirements for entry
Lower costs driven by economies of scale
Government protection through patents or licensing
requirements
Strong brands
 
4. Firms have a competitive advantage when they
can deliver the same product or service benefits as
competitors at a lower cost.  Also firms have a
competitive advantage when they can deliver
superior product or service benefits than the
competitor at a higher cost.
The first statement is false and the second statement
is true.
Both statements are false.
Both statements are true.
The first statement is true and the second
statement is false.
 
5. An industry is defined as
a group of firms producing products that are close
substitutes.
firms that have the same resources and capabilities.
a group of firms producing the exact same products
and services.
firms producing items that sell through the same
distribution channels.
6. When a resource or capability is valuable, rare,
hard to imitate, and non-substitutable firms may
gain
a temporary competitive advantage.
a complex competitive advantage.
a sustainable competitive advantage.
competitive parity.
 
7. The concept that describes firms possessing
different bundles of resources is
barriers to entry
resource immobility
imitability
resource heterogeneity
 
 8. The following are  one of three strategies a
firm can adopt in order to stay one step ahead of
the forces of competition, except
product differentiation
cost reduction
encourage product substitution
reduction in the intensity of competition
9. Which of the following is NOT a factor that
contributes to higher rivalry in an industry?
High fixed costs.
Low switching costs for buyers.
Fast industry growth.
Numerous competitors.
10. The following are composition of the resources
and capabilities of an excellent firm  performance,
except
organizational excellence
customer’s loyalty
intellectual assets
human capital
11.  Which of the following is critical for a firm
adopting a long-term cost-reduction strategy?
The firm must also differentiate its product or
service.
The strategy reduces costs by at least 10%.
The strategy is focused on reducing internal
production costs.
The methods of achieving cost reductions are
difficult to imitate.
12. The following are some conditions that make a
resource hard to imitate or duplicate , except
When  the link between resources and advantage is
ambiguous.
When sustainable competitive advantage is
publicly available knowledge.
When a resource is socially complex.
Resources that flow from a firm’s unique historical
conditions.
13. One of characteristics of the best industries
which was not included in Porter’s Five Forces
 
cooperation from complements
high entry barriers
low threat of substitutes
low supplier power
 
14. If a firm successfully adopts a product
differentiation strategy, the elasticity of demand
for its products should
be unaffected.
decrease.
increase.
become marginal.
 
15. When a resource or capability is valuable,
inimitable and rare, a firm may gain
temporary competitive advantage.
cost advantage.
sustainable competitive advantage.
competitive parity.
16.  If buyers expect future price increases, they
will ___________ their purchases to avoid it.
Similarly, sellers will __________ selling to take
advantage of it.
Accelerate; accelerate
Accelerate; delay
Delay; delay
Delay; accelerate
 
17. The intersection between demand for dollars
and the supply of dollars is known as the
Inflation rate
Price
Quantity
Exchange rate
 
18.  An individual in the United States wants to
buy office equipment from England that costs
2,800 pounds. If the exchange rate is $1.92, how
much will it cost him in dollar terms?
$5,376 (2800*1.92)
Need more information
$2,800
$1,458
 19. Currency appreciation help consumers
because they make imports cheaper in the
domestic currency.  Also helps suppliers because
they make exports less expensive in the foreign
currency.
The first statement is true and the second
statement is false.
Both statements are true.
Both statements are false.
The first statement is false and the second statement
is true.
20. Should the Philippine peso devalue relative to
the U.S. dollar which of the following is not true?
U.S. producers will benefit
Filipino consumers will be hurt.
U.S. consumers will not be affected.
Filipino producers will benefit.
21. Following a peso appreciation relative to the
dollar, which of the following results is expected to
occur?
Prices in the United States would rise, and prices
in Mexico would fall.
Prices in the United States would rise, and prices in
Mexico would rise.
Prices in the United States would fall, and prices in
Mexico would rise.
Prices in the United States would fall, and prices in
Mexico would fall.
 
22. Following an increase in Mexican interest rates
relative to U.S. interest rates, which caused
Mexican investors to borrow abroad to invest
domestically, which of the following is expected to
occur?
The dollar would depreciate relative to the peso,
and Mexican prices would decrease.
The dollar would depreciate relative to the peso, and
Mexican prices would increase.
The dollar would appreciate relative to the peso, and
Mexican prices would increase.
The dollar would appreciate relative to the peso, and
Mexican prices would decrease.
 
23. Following are certain features of bubbles that
economists have documented, except              The first statement is true and the second statement is
it's more costly to bet on prices going down than up,
because the bullish investors dominate.
Financial bubbles are marked by huge increases in
trading
Bubbles emerge at times when investors disagree
about the significance of a big economic
development.
Bubbles can easily figure out by most
businessmen, henceforth its occurrence can easily
be predicted.
24. If the U.S. economy strengthens, consumer
incomes increase, and consumers buy more
imported goods and services.  How will this affect
exchange rates?
The dollar will depreciate relative to the yuan, and
U.S. prices will increase.
The dollar will depreciate relative to the yuan, and
U.S. prices will decrease.
The dollar will appreciate relative to the yuan, and
U.S. prices will decrease.
The dollar will appreciate relative to the yuan, and
U.S. prices will increase.
 
25. Following a peso appreciation relative to the
dollar, which of the following results is expected to
occur?
U.S. consumers would benefit, and Mexican
producers would benefit.
U.S. consumers would benefit, and Mexican
producers would be hurt.
U.S. consumers would be hurt, and Mexican
producers would be hurt.
U.S. consumers would be hurt, and Mexican
producers would benefit.
26. The so-called “carry trade,” borrowing in
foreign currency to buy imports or invest in a
foreign country does not affect the exchange rates,
However, borrowing in foreign currencies to
spend or invest domestically, increases demand
for the domestic currency, appreciating the
domestic currency.
Both statements are false.
Both statements are true.
The first statement is false and the second statement
is true.
false.
 
27. Bubbles (if they exist) are prices that can be
explained by normal economic forces. Purchasing
power parity means that exchange rates and/or
prices adjust so that tradable goods cost is the
same everywhere.
The first statement is true and the second statement is
false.
Both statements are true.
Both statements are false.
The first statement is false and the second
statement is true.
 
28. If the Chinese yuan devalues relative to the US
dollar, then
US producers will benefit; Chinese consumers will
benefit
Currency devaluation helps domestic firms by
increasing demand but hurts domestic consumers by
increasing domestic price.
US producers will be hurt; Chinese consumers
will be hurt.
US producers will benefit; Chinese consumers will be
hurt
29. If buyers expect a future price increase, they
will delay their purchases to avoid it. Similarly,
sellers will accelerate selling to take advantage of
it.
Both statements are true.
Both statements are false.
The first statement is true and the second statement is
false.
The first statement is false and the second statement
is true.
30. Following an increase in Mexican interest rates
relative to U.S. interest rates, which caused US
investors to invest in Mexican Bonds.  Which of
the following would occur?
The dollar would depreciate relative to the peso, and
Mexican prices would increase.
The dollar would appreciate relative to the peso, and
Mexican prices would increase.
The exchange rate would not be affected, and
neither would Mexican prices.
 The dollar would depreciate relative to the peso, and
Mexican prices would decrease.
31. On average, if demand is unknown and costs
of underpricing are _______ than the costs of
overpricing, then _________.
None of these
smaller; overprice
larger; underprice
smaller; underprice
32. All of the following choices are examples of
promoting a firm’s product, except
discount coupons.
pricing
celebrity endorsements.
end-of-aisle displays.
 33. A shoe-producing firm decides to acquire a
firm that produces shoe laces. This implies that
the firm’s aggregate demand (shoes + laces) will
be:
more elastic than the individual demands.
less elastic than the individual demands.
equally elastic as the individual demands.
None of these
 
34. After firm A producing one good acquired
another firm B producing another good, it
lowered the prices for both goods. One can
conclude that the goods were
complements.
None of these
not related.
substitutes.
 
35. After massive promotion of Rihanna’s latest
music album, the producers reacted by raising
prices for her albums. This implies that promotion
expenditures made the album demand
change due to psychological pricing.
unitary elastic.
less elastic.
more elastic.
36. Firms tend to raise the price of their goods
after acquiring a firm that sells a substitute good
because
they lose market power.
the aggregate demand for both goods is less elastic
than the demand for the individual goods.
the aggregate demand for both goods is more elastic
than the demand for the individual goods.
there is an increase in the overall demand for their
products.
 
37.  After acquiring a substitute product, which of
the following is not the recommended action to
do?
raise price more on the low-margin (more price
elastic demand) product.
reduce price on both products to eliminate price
competition between them.
reposition the products so that there is less
substitutability between them.
raise price on both products to eliminate price
competition between them.
38.  For products like parking lots and hotels,
costs of building capacity are mostly fixed or sunk
and firms in this industry typically face capacity
constraints. Therefore,
if MR<MC at capacity, then the firms should price to
fill capacity.
if LRMR<LRMC at capacity, then the firms should
price to fill capacity.
if MR>MC at capacity, then the firms should
price to fill capacity.
if LRMR>LRMC at capacity, then the firms should
price to fill capacity.
 39. A firm that acquires a substitute product can
reduce cannibalization by
setting the same price on both products.
doing nothing.
repositioning a product so that it does not directly
compete with the substitute.
lowering prices on the low-margin products.
40. Which of the following statements is false?
After acquiring a substitute product, reduce price
on both products to eliminate price competition
between them.
If demand is unknown, and the costs of underpricing
are smaller than the costs of over-pricing, then
underprice, on average, and vice-versa.
If demand is unknown, and the costs of underpricing
are smaller than the costs of over-pricing, then
underprice, on average, and vice-versa.
After acquiring a complementary product, reduce
price on both products to increase demand for both
products.
 
41. Resources are defined as “the tangible and
intangible assets firms use to conceive of and
implement their  “strategies”
True
False
42. Tipping is an element of strategy by using a set
of techniques to create a platform by making a
technology  to a particular technological system
and market.
True
False
43.  Competitive advantage flows from having
something that competitors can't easily duplicate
True
False
44.  According to the resource-based view (RBV),
individual firms may exhibit sustained
performance advantages due to the superiority of
their resources.  
True
False
 
45. Resources that may generate unstable
competitive advantage do not necessarily lead to a
sustainable competitive advantage.
True
False
46. A valuable resource must allow a business to
conceive of and implement strategies that improve
its efficiency or effectiveness.
True
False
47. Sustaining competitive advantage creates a
“moat” around the company to help protect its
profits from   the forces of competition.
True
False
48. Strategy is the art of matching the resources
and capabilities of a firm to the opportunities and
risks in its  external environment for the purpose
of developing a sustainable competitive advantage
True
False
49. Publicly available knowledge is  going to help 56. Currency devaluation hurts consumers
you create a competitive advantage. because they make imports more expensive in the
domestic currency.
True
False True
  False
 
50. The so-called “carry trade,” borrowing in
foreign currencies to spend or invest in foreign 57. Bubbles persist because no one has the
country does not affect the exchange rates. firepower to successfully attack them.
True True
False False
51. Currency devaluations help consumers  
because they make imports less expensive in the 58.  Investing in a foreign country or importing
domestic currency. goods from a foreign country increases the
True demand for foreign currency.   
False
True
52. If sellers expect a future price increase, they False
will accelerate their sales to take advantage of it.  
59. Reducing price at one store steals sales from
 True the other (reduces MR at both) to counter the
falling MR, raise prices at both stores to
False maximize profits.
 
True
53. The bubble will never pop even if sufficient False
number of skeptical investor act simultaneously.
 60. Psychological biases suggests “framing” price
True changes as gains rather than as losses.
False
54.  Increasing demand for foreign currency leads True
to the depreciation or devaluation of domestic False
currency.
 
True
False
 
55. Borrowing in foreign currency to buy imports
or invest in a foreign country devalue domestic
currency.

True
False