For Years, Amazon

question 85

Multiple Choice

For years, Amazon.com, which began as an Internet bookseller, had no profits and was incurring annual losses. Still, the stock market valued the company very highly. One reason for this was that investors believed that:

• A) Amazon.com was in a winner-takes-all market.
• B) Amazon.com faced fierce foreign competition.
• C) the Internet was a perfectly competitive market.
• D) on the Internet brand recognition is unimportant.

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Definitions:

MU/P Ratio

The ratio of marginal utility (MU) to price (P), used to determine the optimal consumption point where consumer satisfaction per unit of cost is maximized.

Marginal Utility

The heightened benefit received from using one more unit of a good or service.

Marginal Utility Per Dollar

The additional satisfaction obtained from spending one more dollar on a good or service.