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University of the Cumberlands MBA 531 ASSIGNMENT NINE CHAPTER 12 MORE REALISTIC AND COMPLEX PRICING MULTIPLE CHOICE 1)Acquiring a firm that sells a substitute good would make the demand curve for your original product a

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University of the Cumberlands

MBA 531

ASSIGNMENT NINE

CHAPTER 12 MORE REALISTIC AND COMPLEX PRICING

MULTIPLE CHOICE

1)Acquiring a firm that sells a substitute good would make the demand curve for your original product

a.            More inelastic

b.            More elastic

c.             Unchanged

d.            None of the above

 

2.            You own two different energy drink brands: “Blue Cow” and “600 minute energy.” If you reduce the price on

“Blue Cow”,

a.            Sales of “Blue Cow” would increase, without any changes in sales for “600 minute energy.”

b.            Sales of both “Blue Cow” and “600 minute energy.” would increase

c.             Sales of “Blue Cow” would increase, but the sales of “600 minute energy” would be cannibalized

d.            Neither “Blue Cow” nor “600 minute energy” would see an increase in sales.

 

3.            You own two different energy drink brands: “Blue Cow” and “600 minute energy.” If you reduce the price on

“Blue Cow”, sales of “600 minute energy” would

a.            Increase

b.            Decrease

c.             Not change

d.            None of the above

 

4.            You own two different energy drink brands with similar elasticities: “Blue Cow” and “600 minute energy.” If you reduce the price on “Blue Cow”, you can only increase your total sales if

a.            Prices for “600 minute energy” are increased

b.            Prices for “600 minute energy” are reduced

c.             Prices for “600 minute energy” stay constant

d.            None of the above

 

5.            The general rule to increase profits when two close substitute brands are jointly owned is

a.            Increase prices for both brands

b.            Decrease prices for both brands

c.             Increase prices on one brand, decreasing it for the other

d.            Increase prices on one brand, keeping the prices of the second brand constant

 

6.            After acquiring closely substitutable product brands, a firm can successfully raise prices on both of the brands without losing much of its total sales because

a.            Customers are insensitive to price changes

 

b.            None of these sales would be captured by its other brand

c.             Some of these sales lost by one brand would be captured by the other

d.            All of the above

 

7.            In a multi-product firm, cannibalization is

a.            An increase in the quality of both the brand’s products

b.            A decrease in the quality of both the brands products

c.             An increase in both the brand’s sales

d.            An increase in one of the brand’s sales due to the decrease in sales of the other.

 

8.            If an ice-cream manufacturer acquires a frozen yogurt producer, you would likely see

a.            Lower prices for both the ice cream and the frozen yogurt

b.            Higher prices for both the ice cream and the frozen yogurt

c.             Higher prices for ice cream, but lower prices for frozen yogurt

d.            Higher prices for frozen yogurt but lower prices for ice cream

 

9.            If a hot dog manufacturer acquires a bakery that primarily bakes hot dog buns, you would likely see

a.            Higher prices for the hot dogs but lower prices for the buns

b.            Higher prices for the buns but lower prices for the hot dogs

c.             Higher prices for both the hot dogs and the buns

d.            Lower prices for both the hot dogs and the buns

 

10.          Which of the following is true?

a.            To reduce cannibalization among products, reposition a product so that it does not directly compete with the other

b.            After acquiring a substitute product, raise prices on both the products

c.             After acquiring a complementary product, lower prices on both the products

d.            All of the above

 

11.          Which of the following is true?

a.            To reduce cannibalization among products, reposition a product so that it does not directly compete with the other

b.            After acquiring a substitute product, lower prices on both the products

c.             After acquiring a complementary product, raise prices on both the products

d.            All of the above

 

12.          Which of the following is FALSE?

a.            To reduce cannibalization among products, reposition a product so that it does not directly compete with the other

b.            After acquiring a substitute product, raise prices on both the products

c.             After acquiring a complementary product, raise prices on both the products

 

d.            All of the above

 

 

13.          Which of the following is FALSE?

a.            To reduce cannibalization among products, reposition a product so that it does not directly compete with the other

b.            After acquiring a substitute product, lower prices on both the products

c.             After acquiring a complementary product, lower prices on both the products

d.            All of the above

 

14.          Which of the following is FALSE?

a.            To reduce cannibalization among products, make the products more homogenous

b.            After acquiring a substitute product, raise prices on both the products

c.             After acquiring a complementary product, lower prices on both the products

d.            All of the above

 

15.          Which of the following is TRUE?

a.            To reduce cannibalization among products, reposition a product so that it does not directly compete with the other

b.            After acquiring a substitute product, lower prices on both the products

c.             After acquiring a complementary product, raise prices on both the products

d.            None of the above

 

16.          For jointly owned substitute products, cannibalization leads to MR          MC

a.            Being higher than

b.            Being lower than

c.             Equaling

d.            None of the above

 

17.          Upon acquiring a complement the inter-relatedness of demand leads to, MR    

a.            Rising

b.            Falling

c.             Staying constant

d.            None of the above

 

18.          The general rule to increase profits when two close complementary brands are jointly owned is

a.            Increase prices for both brands

b.            Decrease prices for both brands

c.             Increase prices on one brand, decreasing it for the other

d.            Increase prices on one brand, keeping the prices of the second brand constant

 

19.          Firm A owns produces both toothpaste and toothbrushes. In order to increase profits the firm must

a.            Increase prices for both toothbrushes and toothpaste

b.            Decrease prices for both toothbrushes and toothpaste

c.             Increase prices on toothbrushes and increase the price on toothpaste

d.            Increase prices on toothbrushes but keep the price on toothpaste constant

 

20.          You are the owner of an art supply store, selling both paint and paintbrushes. In order to maximize total sales you should

a.            Decrease the price on the paint only

b.            Decrease the price on paintbrushes only

c.             Decrease the price on both the paint and the paintbrushes

d.            Increase the price on both the paint and the paintbrushes

 

21.          Firm X owns both a grocery store and the parking lot outside the grocery store. In order to increase the traffic at the store it must

a.            Decrease the prices on the goods sold in the store

b.            Decrease the parking rates

c.             All of the above

d.            None of the above

 

22.          Brenda’s Bakery started selling coffee along with pastries. In order to increase total sales she should

a.            Increase the prices on coffee

b.            Decrease the price on pastries

c.             Increase the price of pastries

d.            Shut down

 

23.          Firm X owns both a grocery store and the parking lot outside the grocery store. In order to increase the traffic at the store the owners of the store should

a.            Increase the prices on the goods sold in the store

b.            Increase the parking rates

c.             All of the above

d.            None of the above

 

24.          Firm X owns both a grocery store and the parking lot outside the grocery store. In order to increase the traffic at the store, the store should

a.            Decrease the prices on the goods sold in the store

b.            Increase the parking rates

c.             All of the above

d.            None of the above

 

25.          Firms tend to raise the price of their goods after acquiring a firm that sells a substitute because

a.            They lose market power

b.            There is an increase in the overall demand for their products

c.             The bundle has a more elastic demand than individual goods

d.            The bundle has a more inelastic demand than individual goods

 

26.          A firm that acquires a substitute product can try to reduce inter-product cannibalization by

a.            Doing nothing

b.            Repositioning its product or the substitute so that they do not directly compete with each other

c.             Pricing each product at the same level

d.            Lowering the prices on both the products

 

27.          After firm A acquired firm B, it raised the prices for the goods produced by both firms. This can increase profits if those goods are

a.            Substitutes

b.            Complements

c.             Not related

d.            None of the above

 

28.          After firm A acquired firm B, it lowered the prices for the goods produced by both firms. This can increase profits if the goods are

a.            Substitutes

b.            Complements

c.             Not related

d.            None of the above

 

29.          On average, if demand is unknown and costs of underpricing are              than the costs of overpricing, then err on the side of             .

a.            Smaller; overpricing

b.            Smaller; underpricing

c.             Larger; underpricing

d.            None of the above

 

30.          The pricing rule MR=MC holds for

a.            All firms

b.            Single product firms

c.             Multiple product firms

d.            None of the above

 

SHORT ESSAYS

1.            In October, 2014, Vintners Global Resource’s (VGR) agreed to purchase M.A. Silva. VGR is a leading manufacturer of glass bottles and packaging for wines and M.A. Silva is a manufacturer of premium natural corks. What is the expected effect of this merger on price-cost margins?