Question : 21) Refer to Table 11-7. Suppose Wal-Mart and Target both : 1244661

Economics

21) Refer to Table 11-7. Suppose Wal-Mart and Target both advertise that they will match the lowest price offered by any competitor. What is the purpose of such a strategy?

A) to signal to each other not to charge below the current low price

B) to signal to each other that they will not hesitate to initiate a price war

C) to signal to each other that they intend to charge the high price

D) to signal to each other to share the market equally

22) In most business situations where firms compete, often they can escape the prisoner’s dilemma and reach the most profitable outcome. Which of the following is a reason for this?

A) Firms engage in aggressive advertising to overcome the barriers to loyalty.

B) Most games are one-shot games so firms learn from their mistakes.

C) Most games are repeated games and firms can employ retaliation strategies against those who do not cooperate.

D) Firms are constantly improving their products and anticipating changing consumer tastes.

23) Suppose two firms in a duopoly implicitly collude and charge a high price. How might each firm benefit from advertising that it will match the lowest price offered by its competitor?

A) The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact.

B) The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same.

C) The offer to match prices is a way of signaling to antitrust authorities that the firms are not engaged in illegal collusion.

D) The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available.

24) In an oligopoly, firms can increase their market power by

A) selling to buyers who have market power.

B) pursuing dominant strategies.

C) colluding to set prices.

D) undertaking heavy advertising expenditure.

25) If the painting firms in a city sign a contract outlining a pricing plan, they are involved in

A) price competition.

B) a legal form of business contract in the United States.

C) collusion.

D) price regulation.

26) Collusion

A) is rampant in perfect competition as all firms charge the same price.

B) reduces market concentration in an industry.

C) among firms is difficult to maintain because it eliminates long run economic profit.

D) is more difficult when there are many firms producing differentiated products in an industry.

27) Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally

A) prevent rival airlines from competing in that market.

B) increase marginal revenue more than marginal cost.

C) maximize marginal revenue.

D) discourage rivals from matching price cuts.

28) There is much evidence to suggest that airlines are more likely to match price cuts than price increases. Which of the following best explains this evidence?

A) The law of demand which states that an increase in price leads to a decrease in quantity demanded.

B) No one airline wants to be the first to renege on a tacit collusive agreement in which all airlines implicitly agree to match price cuts but not price increases.

C) An airline fears that if it does not match a price cut, its sales may fall considerably but if it does not match a price increase, it will be able to attract customers away from its rivals.

D) Airlines have different costs of production and therefore it is more difficult to agree on a price increase than on a price decrease.

29) A cartel is

A) a temporary storage facility for automobiles.

B) a group of firms that enter into an informal agreement to fix prices to maximize joint profits.

C) a group of firms that enter into a formal agreement to fix prices to maximize joint profits.

D) an example of a group of firms that collectively regulate a competitive industry.

30) What is the incentive for a firm to join a cartel?

A) to be able to earn profits in the long run but not in the short run

B) to be able to earn larger profits than if it was not part of the cartel

C) to completely insulate itself from competition

D) to produce a larger amount of output than if it was not part of the cartel

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July 1, 2023

11) Net income appears on the worksheet:

A) only in the balance sheet credit column.

B) only in the income statement credit column

C) in the income statement debit column and balance sheet debit column

D) in the income statement debit column and balance sheet credit column

12) Net loss appears on the worksheet:

A) in the income statement credit column and balance sheet debit column.

B) only in the income statement credit column.

C) in the income statement debit column and balance sheet credit column.

D) only in the balance sheet debit column.

13) The prepaid rent account has a balance that is $400 less in the worksheet's balance sheet debit column than in the worksheet's trial balance debit column. This would be the result of a:

A) $400 entry to prepaid rent in the worksheet's adjustments debit column.

B) $400 entry to prepaid rent in the worksheet's adjustments credit column.

C) $400 entry to rent expense in the worksheet's adjustments credit column.

D) mistake in cross-adding the worksheet.

14) Salary expense has a balance of $65,400 in the trial balance debit column of a worksheet. The adjustments credit column contains a $500 credit to salary payable. The adjusted trial balance column will show:

A) salary expense with a debit balance of $64,900.

B) salary expense with a debit balance of $6,500.

C) salary expense with a debit balance of $65,900.

D) salary payable with a credit balance of $65,900.

15) Interest expense on a worksheet's trial balance debit column has a $3,400 balance and a $4,000 balance on the worksheet's income statement debit column. The difference is due to:

A) an entry in the adjustments credit column for $600 to interest expense.

B) an entry in the adjustments debit column for $4,000 to interest expense.

C) an entry in the adjustments credit column for $4,000 to interest expense.

D) an entry in the adjustments credit column for $600 to interest payable.

16) On a worksheet, the income statement debit column equals $190,800 and the income statement credit column equals $195,600. From this data, it can be determined that:

A) the company had a net loss of $4,800 added to the income statement credit column.

B) the company had a net income of $4,800 added to the income statement debit column.

C) the company had a net loss of $4,800 added to the income statement debit column.

D) the company had a net income of $4,800 added to the income statement credit column.

17) Which of the following appears in the balance sheet debit column of a worksheet?

A) service revenue

B) income summary

C) owner withdrawals

D) accounts payable

18) Which of the following appears in the income statement credit column of a worksheet?

A) service revenue

B) income summary

C) owner withdrawals

D) accounts receivable

19) If the unearned service revenue account had an unadjusted normal balance of $4,800, and an adjustment was made debiting the account for $1,500, the account would appear on the adjusted trial balance of the worksheet as a:

A) $4,800 debit.

B) $6,300 credit.

C) $3,300 credit.

D) $3,300 debit.

20) After all the account balances have been extended to the balance sheet columns of the worksheet, the totals of the debit and credit columns are $35,350 and $38,750, respectively. It can be concluded the company has a:

A) net income of $3,400.

B) net loss of $3,400.

C) $74,100 net loss.

D) $74,100 net income.