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5. ResearchResearch can help you find the optimum price for your products. Generally, the optimum price is one that your customers are willing to pay, without it affecting your profits. This isn't a one-off activity, you must monitor your key pricing influences regularly as part of your overall market research to ensure your prices stay competitive and you still meet your customers' expectations. Market testingTo help you determine how much your customers are willing to pay for your product or service you should perform some form of market testing. As a start, research your customer's purchasing behaviour such as:
With this customer information in mind, you can then develop a price comparison offering a number of different product or service options for testing to help you determine a price range that is acceptable. CompetitorsYou should have already determined who your direct competitors are and how your business compares to them when you developed your marketing plan. This information can be useful to help you determine your price point. If you decide to use your competitors' prices as a guide, be careful that it doesn't dictate your prices too much, as it can seriously undervalue your product or service and drive down your profits. When you compare your business to competitors, it's also important to ensure you look at the business as a whole and compare on other value-based traits (such as special features, quality and customer service) as well as price. InfluencesPricing influences are external factors that can impact the price of products. Four influences that you may encounter include:
Price sensitivityPrice sensitivity refers to price fluctuations as customer demand increases and decreases. For example, commodity goods such as petrol have high price sensitivity. The difference of a few cents in price can impact a customer’s behaviour. Some markets are more sensitive to price increases than others. Price sensitivity can change over time based on a number of factors including changes in the economic environment, competition or demand. Factors other than price, such as quality, service, and uniqueness, can also influence price sensitivity. Level of demandProduct and service demand can influence your prices. If there is high demand, it is likely you can increase your price. Price can also influence demand. For example, if the price lowers, then demand can temporarily increase. Level of competitionCompetition can also influence your product’s or service’s price. In general, the less competition you have, the more demand there is for your product. If a new competitor enters the market, the competitor can affect your price. Government regulationsGovernment regulation can influence your pricing decision, as additional fees or levies may increase the sale price of your product or service. Which of the following is not a type of market structure?
b. Oligopoly c. Perfect competition d. All of the above are types of market structures. If the market demand curve for a commodity has a negative slope then the market structure must be
b. monopoly. c. imperfect competition. d. The market structure cannot be determined from the information given. If a firm sells its output on a market that is characterized by many sellers and buyers, a homogeneous product, unlimited long-run resource mobility, and perfect knowledge, then the firm is a
b. an oligopolist. c. a perfect competitor. d. a monopolistic competitor. If a firm sells its output on a market that is characterized by a single seller and many buyers of a homogeneous product for which there are no close substitutes and barriers to long-run resource mobility, then the firm is
b. an oligopolist. c. a perfect competitor. d. a monopolistic competitor. If a firm sells its output on a market that is characterized by many sellers and buyers, a differentiated product, and unlimited long-run resource mobility, then the firm is
b. an oligopolist. c. a perfect competitor. d. a monopolistic competitor. If a firm sells its output on a market that is characterized by few sellers and many buyers and limited long-run resource mobility, then the firm is
b. an oligopolist. c. a perfect competitor. d. a monopolistic competitor. If one perfectly competitive firm increases its level of output, market supply
b. will increase and market price will rise. c. and market price will both remain constant. d. will decrease and market price will rise. Which of the following markets comes close to satisfying the assumptions of a perfectly competitive market structure?
b. The market for agricultural commodities such as wheat or corn. c. The market for petroleum and natural gas. d. All of the above come close to satisfying the assumptions of perfect competition. A perfectly competitive firm should reduce output or shut down in the short run if market price is equal to marginal cost and price is
b. less than average total cost. c. greater than average variable cost. d. less than average variable cost. The market demand curve for a perfectly competitive industry is QD = 12 - 2P. The market supply curve is QS = 3 + P. The market will be in equilibrium if
b. P = 5 and Q = 2. c. P = 4 and Q = 4. d. P = 3 and Q = 6. Which of the following is a barrier to entry that typically results in monopoly?
b. Production of the industry's product is subject to economies of scale over a broad range of output. c. Production of the industry's product requires a large initial capital investment. d. The firm holds an exclusive government franchise. In the short run, a monopolist will shut down if it is producing a level of output where marginal revenue is equal to short-run marginal cost and price is
b. less than average total cost. c. greater than average variable cost. d. less than average variable cost. A natural monopolyrefers to a monopoly that is defended from direct competition by
b. a government franchise. c. control over a vital input. d. a patent or copyright. When a perfectly competitive industry is in long-run equilibrium, all firms in the industry
b. produce a level of output where short-run marginal cost is equal to short-run average total cost. c. produce a level of output where long-run marginal cost is equal to long-run average cost. d. All of the above are correct. The short-run supply curve of a perfectly competitive firm
b. is equal to that portion of the short-run marginal cost curve that is above the average total cost curve. c. is equal to that portion of the short-run average total cost curve that is above the average variable cost curve. d. None of the above is correct. The long-run supply curve of a perfectly competitive firm
b. is equal to that portion of the long-run marginal cost curve that is above the relevant short-run average total cost curve. c. is equal to that portion of the long-run average total cost curve that is above the relevant short-run average variable cost curve. d. None of the above is correct. A depreciation of the U.S. dollar relative to foreign currencies will make
b. U.S. exports less expensive in foreign countries. c. the demand for U.S. exports decrease. d. All of the above are correct. The value of the U.S. dollar on the foreign exchange market will tend to
b. decrease if there is an increase in the demand for foreign imports by the United States. c. decrease if monetary authorities intervene on the foreign exchange market by selling U.S. dollars for foreign currencies. d. All of the above are correct. A monopolized market is in long-run equilibrium when
b. production takes place where price is equal to long-run marginal cost and long-run average cost. c. production takes place where long-run marginal cost is equal to marginal revenue and price is not below long-run average cost. d. All of the above are correct. A monopolist produces 14,000 units of output and charges $14 per unit. Its marginal revenue is $8, its marginal cost is $7 and rising, its average total cost is $10, and its average variable cost is $9. The monopolist should
b. increase output, which will reduce the firm's economic losses. c. shut down, which will reduce the firm's economic losses. d. decrease output, which will result in an increase in the firm's positive economic profit. Which of the following types of firms is likely to be a monopolistic competitor?
b. An automobile manufacturer. c. A restaurant. d. All of the above are likely to be monopolistic competitors. Which of the following is a differentiated product?
b. A shirt. c. An automobile. d. All of the above are differentiated products. Which of the following is a characteristic of monopolistic competition?
b. A differentiated product. c. Easy entry into and exit from the industry. d. All of the above are characteristics of monopolistic competition. The demand curve faced by a monopolistically competitive firm is
b. elastic. c. unit elastic. d. inelastic. If an imperfectly competitive firm is producing a level of output where marginal cost is equal to marginal revenue, marginal revenue is below average variable cost, and price is equal to average total cost, then the firm
b. should decrease output, but should not shut down. c. should increase output. d. None of the above is correct. If an imperfectly competitive firm is producing a level of output where marginal cost is equal to marginal revenue, marginal revenue is below average variable cost, and price is equal to average total cost, then the firm is
b. in short-run equilibrium. c. minimizing short-run average total cost. d. breaking even. Product variation refers to
b. a problem with quality control that tends to decrease demand. c. an activity undertaken by a firm to make demand more price inelastic. d. None of the above is correct. Which of the following is a criticism of the theory of monopolistic competition?
b. When product differentiation is slight, each firm's demand curve is nearly horizontal so the perfectly competitive solution provides an adequate approximation to the monopolistically competitive solution. c. When there are strong brand preferences and few producers of many differentiated products, or when there are many producers but only a few compete as rivals for any given consumer, then the oligopoly solution provides an adequate approximation to the monopolistically competitive solution. d. All of the above are correct. Which of the following industries is most likely to be monopolistically competitive?
b. The steel industry c. The car repair industry d. The electrical generating industry Marginal revenue is equal to price for which one of the following types of market structure?
b. Perfect competition c. Monopolistic competition d. Oligopoly What are the four types of markets quizlet?Terms in this set (4). Perfect Competition. Many firms, identical product, high ease of entry. ... . Monopolistic Competition. Many firms, different product, high ease of entry. ... . Oligopoly. Few firms, identical or differentiated product, low ease of entry. ... . Monopoly. One firm, unique product, no entry to market.. Which of the following is true regarding the variety of products produced in monopolistically competitive industries?The monopolistically competitive industry produces a greater variety of products at a higher cost per unit. CORRECT! Under monopolistic competition, there will be a greater variety of products produced at a higher unit cost than under perfect competition.
Which of the following statements is true of costWhich of the following statements is true of cost-based pricing? It determines the price by adding a fixed margin to the per-unit cost of a product.
Which of the markets is the best example of monopolistic competition?The Fast Food companies like the McDonald's and Burger King which sells burger in the market are the most common type of example of monopolistic competition. The two companies mentioned above sell an almost similar type of products but are not the substitute of each other.
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Which of the following statements is correct regarding different types of markets?
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