Question

In: Economics

1. If competitive market circumstances are such that there is some leader-follower price competition, some product...

1. If competitive market circumstances are such that there is some leader-follower price competition, some product differentiation, and the purpose of advertising is to inform, but avoid price competition, then we must be operating in a(n):

-    monopolistic competition.

-    pure competition.

-    oligopoly.

-    pure monopoly.

2. In comparing penetration and skimming price policies:

-    the former is useful when the firm has excess production capacity.

-    the former sets a price without considering competition.

-    the latter discourages the entrance of competitors.

-    the latter is appropriate when demand is price elastic.

3. Reebok has developed a marketing strategy designed to produce inelastic cross-elasticity for their brand. What is the major reason Reebok is attempting to accomplish this?

-    it wants to show the value of each brand attribute and relate it to the price of its brand.

-    it wants to have more success when it puts its products on sale at season or year-end.

-    it wants price to be less important to buyers than other brand attributes.

-    it wants to be able to use price as a key tool to take market share away from Nike.

4. The price-quality association is most likely to occur when buyers:

-    know the names of the major brands in a product category.

-    can readily judge the overall quality of a product.

-    have little experience in judging quality.

-    perceive small differences in quality among brands.

Solutions

Expert Solution

1. oligopoly.
(All these are characteristics of oligopoly. There is leader-follower price competition, some product differentiation, and purpose of advertising is to inform, but avoid price competition.)

2. the former is useful when the firm has excess production capacity.
(Penetration pricing strategy helps in charging lower prices when the firm has excess production capacity.)

3. it wants to show the value of each brand attribute and relate it to the price of its brand.
(Reebok is attempting to accomplish this so that it can show the value of each brand and compare its price with other brands.)

4. perceive small differences in quality among brands.
(When buyers want to see quality differences between brands, they associate the quality with price.)


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