Econ 201 Exam questions and
answers graded A+
Pricing power is the ability of a firm to
A. Advertise.
B. Charge any price it wants.
C. Increase the number of substitute goods.
D. Control the price and quantity supplied. - ANS✅✅D. Control the price and quantity supplied.
An industry's pricing power depends primarily on
A. How much firms spend on advertising.
B. The number and size of the firms in the industry.
C. Whether the market is a product market or a resource market.
D. What types of products are produced in that industry. - ANS✅✅B. The number and size of the
firms in the industry.
There are many corn farmers, each of whom produces the same product. The corn market can best
be classified as
A. Perfect competition.
B. Monopoly.
C. Brand loyalty.
D. Price leadership. - ANS✅✅A. Perfect competition.
When firms are interdependent,
A. The profit of one firm depends on how its rivals respond to its strategic decisions.
B. They can act independently of one another.
C. Then the market is perfectly competitive.
D. One firm can ignore other companies in the market when making decisions. - ANS✅✅A. The
profit of one firm depends on how its rivals respond to its strategic decisions.
The only market structure in which there is significant interdependence among firms with regard to
their pricing and output decisions is
, A. Monopoly.
B. Brand loyalty.
C. Perfect competition.
D. Price leadership. - ANS✅✅D. Price leadership.
The degree of pricing power exercised by a firm is related to all but
A. The price elasticity of demand for the firm's product.
B. The age of the industry.
C. Its ability to influence the market price of its output.
D. The number and proximity of competing firms. - ANS✅✅B. The age of the industry.
If firms in a price leadership industry start cutting prices to capture a larger market share, the result
will be
A. Higher prices, increased output, and larger profits.
B. Lower prices, decreased output, and larger profits.
C. Lower prices, increased output, and smaller profits.
D. Lower prices, increased output, and larger profits. - ANS✅✅C. Lower prices, increased output,
and smaller profits.
Which one of the following is not a danger of experimenting with pricing for an price leadership
firm?
A. Retaliation.
B. Firms matching price reductions.
C. The uncertainty of competitor response.
D. Product differentiation. - ANS✅✅D. Product differentiation.
The kinked demand curve explains the observation that in price leadership markets
A. Practice product differentiation.
B. Rivals do not match price reductions.
C. Prices may not change even in the face of cost increases.
D. Rivals match price increases. - ANS✅✅C. Prices may not change even in the face of cost
increases.
answers graded A+
Pricing power is the ability of a firm to
A. Advertise.
B. Charge any price it wants.
C. Increase the number of substitute goods.
D. Control the price and quantity supplied. - ANS✅✅D. Control the price and quantity supplied.
An industry's pricing power depends primarily on
A. How much firms spend on advertising.
B. The number and size of the firms in the industry.
C. Whether the market is a product market or a resource market.
D. What types of products are produced in that industry. - ANS✅✅B. The number and size of the
firms in the industry.
There are many corn farmers, each of whom produces the same product. The corn market can best
be classified as
A. Perfect competition.
B. Monopoly.
C. Brand loyalty.
D. Price leadership. - ANS✅✅A. Perfect competition.
When firms are interdependent,
A. The profit of one firm depends on how its rivals respond to its strategic decisions.
B. They can act independently of one another.
C. Then the market is perfectly competitive.
D. One firm can ignore other companies in the market when making decisions. - ANS✅✅A. The
profit of one firm depends on how its rivals respond to its strategic decisions.
The only market structure in which there is significant interdependence among firms with regard to
their pricing and output decisions is
, A. Monopoly.
B. Brand loyalty.
C. Perfect competition.
D. Price leadership. - ANS✅✅D. Price leadership.
The degree of pricing power exercised by a firm is related to all but
A. The price elasticity of demand for the firm's product.
B. The age of the industry.
C. Its ability to influence the market price of its output.
D. The number and proximity of competing firms. - ANS✅✅B. The age of the industry.
If firms in a price leadership industry start cutting prices to capture a larger market share, the result
will be
A. Higher prices, increased output, and larger profits.
B. Lower prices, decreased output, and larger profits.
C. Lower prices, increased output, and smaller profits.
D. Lower prices, increased output, and larger profits. - ANS✅✅C. Lower prices, increased output,
and smaller profits.
Which one of the following is not a danger of experimenting with pricing for an price leadership
firm?
A. Retaliation.
B. Firms matching price reductions.
C. The uncertainty of competitor response.
D. Product differentiation. - ANS✅✅D. Product differentiation.
The kinked demand curve explains the observation that in price leadership markets
A. Practice product differentiation.
B. Rivals do not match price reductions.
C. Prices may not change even in the face of cost increases.
D. Rivals match price increases. - ANS✅✅C. Prices may not change even in the face of cost
increases.
