Question

A perfectly competitive firm's short-run supply curve is

a. perfectly elastic at the market price.

b. horizontal at the minimum average total cost.

c. upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve.

d. upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve.

The reason that the coffeehouse market is monopolistically competitive rather than perfectly competitive is because

Select one:

a. barriers to entry are very low.

b. entry into the market is blocked.

c. products are differentiated.

d. there are many firms in the market.

To be successful with a differentiation strategy, a company has to

Select one:

a. Concentrate on differentiating its product on the basis of superior product quality or personalized customer service.

b. study buyers" needs and behaviour very carefully to learn what they consider important, what they think has value, and what they are willing to pay for

c. outspend rivals on R&D in order to have differentiating attributes that rivals don't have.

d. incorporate more differentiating features into its product/service offering than rivals and also charge a price no higher than the prices charged by rivals.

e. have a state-of-the-art value chain and concentrate on providing buyers with a technologically superior product

Answer 1

1) A perfectly competitive firm's supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes profit by producing the quantity of output where P = MC . Answer : c. upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve.

2) c. products are differentiated. ( The basic feature of monopolistically competitive market is that products are differentiated )

3) b. study buyers" needs and behaviour very carefully to learn what they consider important, what they think has value, and what they are willing to pay for ( Differentiated strategy in every market works when firms study elasticity of demand , buyers needs and brand recognition )