Chapter 3 Multiple-choice questions

. Which of the following need to be identified when defining a market?

Complementary products, government action, geographical boundaries.

Rival products, competitor firms, geographical boundaries.

Market share, rival products, geographical boundaries.

Government action, rival products, geographical boundaries.

. Vertically integrated firms:

Produce a range of consumer goods.

Operate at different stages of production of a product.

Produce a range of products for industrial and commercial customers.

Assemble a product for sale to the final consumer.

. Which of the following would you expect to have a high cross elasticity of demand for their goods or services?

Firms producing cement for the construction industry.

Banks specializing in giving advice on mergers and high street banks.

Firms offering telephony services and makers of mobile handsets.

All of the options given.

. Which of the options best describes an oligopolistic market structure?

Many competitors, differentiated products, price as the main form of competition.

Many competitors, undifferentiated products, no barriers to entry/free entry and exit.

Few competitors, recognized interdependence among firms, firms having a degree of control over the market.

Few competitors, firms having no market control, differentiated products.

. Market concentration measures:

The geographical concentration of firms in an industry.

The extent to which firms are able to exercise control over suppliers.

The distribution of market power among firms in the market.

The degree of control firms have over their competitors.

. Which of the following is not a force in the Porter Five Forces model?

Buyers.

Suppliers.

Complementary products.

Industry rivalry.

. Industry rivalry is likely to be more intense when:

The market is dominated by one seller.

The market is growing very slowly.

Fixed costs are low relative to total costs.

Firms are selling highly differentiated products.

. Using Porter's Five Forces model, which of the following would be seen as substitutes for tourist flights to Western Europe offered by airlines such as BA or Air France?

Flights provided by Lufthansa and Aer Lingus.

Flights offered by low cost airlines such as Ryanair and EasyJet.

Travel on the Eurostar.

Video-conferencing facilities.

. According to Porter, suppliers are more able to exercise bargaining power over buyers when:

The supply industry is dominated by a few large firms.

The supply industry is populated by a large number of small firms.

When buyers have the ability to take over suppliers.

There are few buyers in the market.

. Potential rivals will not find it difficult to enter a market where:

Existing firms have long-term contracts with the biggest customers.

Product differentiation is very strong.

Existing firms have the ability to retaliate strongly.

Economies of scale are insignificant.

Chapter 3 Multiple-choice questions

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