89) David manages a Shoney’s restaurant. He is considering staying open later in the evening.
For David, the variable costs associated with staying open longer hours will include all of the
following except
A) ingredients used in preparing food.
B) hours worked by cooks.
C) rent on the restaurant building.
D) energy costs.
E) hours worked by the servers.
90) Variable costs change with
A) changes in fixed costs.
B) changes in cross-price elasticity.
C) changes in target return pricing.
D) changes in the quantity being produced.
E) competitive parity.
91) Raymond estimates that the fixed costs associated with opening a new bank branch are
$500,000. He expects the branch to attract 1,000 new customer accounts in the first year, each of
which will cost $50 per year to service. He also expects to generate $100,000 per year in
revenue. For Raymond, the total cost of opening the new branch and remaining open for one year
will be
A) $500,000.
B) $550,000.
C) $650,000.
D) $450,000.
E) $605,000.
92) At the break-even point,
A) costs are zero.
B) price is maximized.
C) profits are zero.
D) fixed costs are zero.
E) contribution per unit is zero.
93) The break-even point is estimated by
A) multiplying revenue per unit times the quantity sold.
B) dividing fixed contribution per unit by variable costs.
C) multiplying fixed costs by contribution per unit.
D) dividing fixed costs by contribution per unit.
E) dividing variable costs by fixed costs.
94) If the fixed costs of manufacturing a new cell phone are $10,000, the sales price is $60, and
variable cost per unit is $20, the break-even point is
A) 100 units.
B) 4,000 units.
C) 20 units.
D) 1,000 units.
E) 250 units.
95) Jacob rents rooms in his hotel for an average of $100 per night. The variable cost per rented
room is $20, to cover maid service and utilities. His fixed costs are $100,000 and his profit last
year was $20,000. For Jacob, the contribution per unit is
A) $100.
B) $80.
C) $800.
D) $1,000.
E) It cannot be determined from the information provided.
96) The contribution per unit is
A) price minus total costs.
B) price minus total variable cost.
C) price minus variable cost per unit.
D) total revenue minus total cost.
E) break-even quantity divided by total fixed costs.
97) Jason rents rooms in his hotel for an average of $100 per night. The variable cost per rented
room is $20. His fixed costs are $100,000 and his target profit is $20,000. For Jason, to earn his
target profit, he will need to rent out ________ rooms.
A) 100
B) 1,500
C) 20,000
D) 1,000
E) It cannot be determined from the information provided.
98) Break-even analysis is useful because it allows managers to
A) quantify the relationship between price elasticity and product elasticity.
B) reposition products based on their break-even positioning revenue.
C) estimate the quantity they will need to sell at a given price to break even.
D) determine the relationship between price and quantity demanded.
E) analyze the different elements contributing to their variable costs.
99) One of the limitations associated with break-even analysis is that
A) it assumes fixed costs are zero.
B) it cannot adjust for high variable costs.
C) it tells marketers only what price is needed to break even.
D) it assumes that there is only one price.
E) it assumes that demand is extremely inelastic.
100) Which of the following markets is most likely to be characterized by oligopolistic
competition in the United States?
A) soybeans
B) pens and pencils
C) smartphone service providers
D) men’s clothing
E) electrical service to the home
101) Because there are only a few firms in markets with oligopolistic competition,
A) everyone is a price taker.
B) producers do not have to consider the reactions of rival firms.
C) government often encourages consolidation to reduce the number of competitors.
D) price wars may occur.
E) the many competitors will focus on product differentiation.
102) In a market with ________ there are many firms providing differentiated products.
A) pure competition
B) oligopolistic competition
C) monopolistic competition
D) a monopoly
E) a duopoly
103) Because there are many firms in monopolistic competition markets,
A) everyone is a price taker.
B) producers do not have to consider the reactions of rival firms.
C) government often encourages consolidation to reduce the number of competitors.
D) price controls may be implemented.
E) the many competitors will focus on product differentiation.
104) In ________ many firms provide similar products that are considered substitutes for each
other.
A) pure competition
B) oligopolistic competition
C) monopolistic competition
D) a monopoly
E) a duopoly
105) Which of the following is most likely to be characterized by pure competition in the United
States?
A) spices
B) cereal
C) soft drinks
D) computer operating systems
E) fast-food restaurants
106) Because there are many firms with similar products in purely competitive markets,
A) price is determined by the laws of supply and demand.
B) consumers develop personal preferences.
C) firms find it easy to build strong, distinct brands.
D) advertising is heavily used.
E) the many competitors will focus on variable cost pricing.
107) If a firm in a purely competitive market can differentiate its product or service, it becomes
part of a(n) ________ market.
A) pure competition
B) oligopolistic competition
C) monopolistic competition
D) monopoly
E) duopoly
108) How can a company find its way out of a market characterized by pure competition?
A) consistently offer the lowest price until other competitors leave the market
B) increase prices and attract different, quality-oriented customers
C) decrease the amount of available product until the market reacts
D) increase the amount of available product to flood the market
E) differentiate the product in some way, even by packaging, so customers will see it as distinct
109) When the price for Blu-ray players dropped, the demand for DVD players went down, so
DVD players and Blu-ray players are
A) complementary products.
B) outsourced products.
C) substitute products.
D) interchangeable products.
E) superior products.
110) In one year, the Hotel by the Shore incurred $100,000 in fixed costs. Because the hotel
booked 10,000 room nights, its total variable cost is $100,000 (10,000 room nights × $10 per
room). Thus, its total cost is
A) $10,000.
B) $200,000.
C) $20,000.
D) $100,000.
E) $120,000.
111) There is often only one provider of cable television services in each region of the country:
Time Warner is in New York, Comcast is in most of New England, and so forth. When Comcast
recently proposed a plan to buy Time Warner, the purchase ultimately could not be completed,
mostly due to concerns that it would have caused Comcast to become an overly large ________
with too much power.
A) monopolist
B) oliogopolist
C) pure competitor
D) predator
E) icon
112) Predatory pricing
A) is legal in the United States.
B) occurs when a firm sets a very high price for one or more of its products.
C) is illegal in the United States under both the Sherman Antitrust Act and the Federal Trade
Commission Act.
D) is legal in the United States when a company wants to set a very low price to drive its
competition out of business.
E) occurs when there are many firms competing for customers in a given market but their
products are differentiated.
53
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113) Diane owns a bakery where she sells cupcakes. Two blocks down there is another bakery,
CC’s Bakery, that sells cupcakes for $1 less than Diane. Diane decides to lower her price and
match CC’s Bakery prices. What type of pricing strategy is Diane implementing?
A) internal pricing
B) profit-oriented pricing
C) competitor-oriented pricing
D) customer-oriented pricing
E) sales-oriented pricing
114) The point at which the number of units sold generates enough revenue to equal the total
costs of running an operation is known as the
A) contribution per unit.
B) fixed cost margin.
C) break-even point.
D) unit cost.
E) marginal revenue.
115) The commercial airline industry is considered what type of market?
A) duopoly
B) monopoly
C) monopolistic competition
D) pure competition
E) oligopolistic competition
116) A reference price might be considered deceptive if
A) the internal reference point is different from the external reference point.
B) the reference price is more than two times the cost of the item.
C) the reference price has been inflated or is fictitious.
D) the reference price has changed more than once in the past 12 months.
E) it reflects actual manufacturing costs plus 50 percent.