1. Generic goods ________, while heavily-advertised brands ___________.
A) Are inferior goods; are normal goods
B) Emphasize value; emphasize quality
C) Appeal to brand loyalty; appeal to value loyalty
D) All of the above.
E) Both A and B.
I said D
2. Apple refuses to license its music copy-protection software to non-iPod players because
A) its partnering iTunes Music Store only wants its songs to be playable on iPods.
B) it wants to lock in its iPod customers by making their iTunes song non-playable on competing players.
C) Apple makes more money from selling iTunes songs than from selling iPods.
D) it wants to maintain premium prices on its iTunes songs.
I said B
3. Which products will reward buyers who can afford to wait?
A) Standardized products in a saturated market.
B) Perishable used items with high Consumer Reports rating.
C) Collectors’ items.
D) Limited edition art objects.
I said C
4 Price competition enlarges ______, while product competition enlarges ________.
A) Consumer surplus; economic surplus
B) Economic profit; consumer surplus
C) Consumer surplus; economic profit
D) Both A and C
I said D
5. Sony digital cameras use Sony’s own proprietary flash memory cards while other digital cameras use third party common-standard flash memory cards.
A) Sony hopes to increase its revenue by selling complementary goods.
B) Sony wants to lock in its customers when they are buying new cameras.
C) Sony wants to earn monopoly profit on its proprietary flash cards.
D) All of the above.
I said D
6. Patented or copyrighted products enjoy a longer period of pricing power because
A) Competitors cannot legally offer patent-infringing products before the patent expires.
B) Competitors are not allowed to see the protected patents.
C) Competitors cannot charge a lower price for a legal copycat product.
D) None of the above.
I said A
7. Generic drugs are cheaper because
A) they are not as potent as the brand-name drugs.
B) generic-drug makers are non-profits.
C) their makers do not have to pay for the R D costs to develop the drugs.
D) generic drugs are subject to price control
I said C
8. An open standard benefits consumers because
A) open standard would encourage the entry of closed proprietary standards.
B) sellers using the open standard are forced to compete on prices.
C) the licensing fee for using the open standard is no higher than using the closed standard.
D) the switch cost between standardized products is high.
I said A
9. Bundling is a method to
A) sell only complementary products.
B) encourage more sales by providing an end-to-end solution to confused first-time buyers.
C) increase profit when price discrimination is also possible.
D) encourage more sales to buyers who already have one of the bundled items.
I said D
10. Network goods tend to grow explosively
A) After a critical mass is reached.
B) Right from the beginning.
C) Because they generate positive externality among themselves after a critical threshold.
D) All of the above.
E) Both A and C.
I said D
February 13th, 2009 at 11:26 pm
1. E (generic goods do not appeal to brand loyalty)
3. B (the price of the good should fall as it approaches expiration because it is worthless after expiration)
8. B (process of elimination, use of open standard does not encourage entry of closed standards - the opposite is the case, there is no licensing fee for open standards - that’s the definition of open standard, there is no switching cost when products are standardized)
9. A (complementary goods are the only goods that are bundled, think left and right shoes or suit jackets and pants. to understand why it is not D think about this: would you buy a new pair of shoes if you already had a left one and could buy the matching right one individually?)
10. E (B is in contradiction to A and C. Think about the growth of the internet, very slow during the late 1980s through the late 1990s then it exploded in the 21st century)
the rest are right