The market environment heavily influences corporate decision-making ability. Discuss the differences in executive decisions concerning pricing, product design, and advertising between a company that exists in a perfectly competitive market and a company in a monopolistically competitive market.
What will be an ideal response?
In a perfectly competitive market, consumers are willing to switch suppliers in order to save even fractions of a penny. Given this extreme price sensitivity, perfectly competitive firms have no pricing power. Perfectly competitive firms must quote the market price. Perfectly competitive firms sell products that are viewed as a commodity by their customers, with no difference in product design. As a result, perfectly competitive firms engage in minimum advertising. In contrast, firms in monopolistically competitive markets have limited pricing power. They compete not only on price, but also seek to differentiate their firm's product with advertising and novel product design. Monopolistically competitive firms have a limited ability to mark up their price above marginal cost.
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The typical total profit graphical presentation is shown as
A. a square. B. a rectangle. C. a hill, or mound. D. an S curve.
The aggregate demand curve shows the quantity of domestic product
A. produced at each possible price level. B. demanded and produced at each possible price level. C. that is exported at each possible price level. D. demanded at each possible price level.
Problems associated with thin markets provide incentives for:
A. buyers to seek information about identifying high-quality items. B. sellers to prove that the items they are selling are of high quality. C. buyers and sellers to agree upon a higher price than would hold in equilibrium. D. both buyers to seek information about identifying high-quality items and sellers to prove that the items they are selling are of high quality.
The end of slavery in the United States represented
A) a large wealth transfer from the South to the North. B) a large wealth transfer from the future to the present. C) a large wealth transfer from Southern slave-holders to newly freed slaves. D) a nominal wealth transfer from Southern slave-holders to newly freed slaves.