Use the Following Information to Answer the Following Question That

question 97

Multiple Choice

Use the following information to answer the following question that refer to the Sure Foot case. Sure Foot, Ltd. produces high-quality shoes and boots for serious hikers.
Sure Foot's shoes have suggested retail prices ranging from just under $40 to about $150. Usually, the retailer buys the shoes for about 50 percent less than the list price, and the retailer pays the freight charges from Sure Foot's plant in Maine. Sure Foot's credit terms are 2/10, net 30. Although Sure Foot's brand appears on every shoe-the firm does very little mass selling, except for a limited program of cooperative advertising and some sales promotion at walking events.
Sure Foot's shoes are carried by "better" sporting goods stores all across the nation-although usually in fairly small quantities. Its main showroom is in Boston, where two salaried salespeople handle most of the firm's large accounts. Sure Foot's products are also sold by seven independent "field reps" who are paid a 5 percent commission on all sales. Each of these field reps is responsible for a several state territory-emphasizing mostly the small stores in or near major cities. The field reps carry Sure Foot's products as a minor line-but none of their lines are competitive with each other.
The walking shoe market is supplied by 7 large firms and 50 or more smaller firms. While these firms are competitive, they do vary their materials, styles, prices, and promotion. The "high-quality" market is supplied by only 5 firms-Sure Foot being the largest. While these firms are also competitive, they generally offer a more limited assortment of materials, styles, and prices because the "high-quality" part of the market is not as large-and does not appear to be growing any more.
In the Sure Foot case, the nature of competition in the hiking shoe market is:

• A) monopolistic competition.
• B) monopoly.
• C) oligopoly.
• D) pure competition.
• E) None of these is a good answer.

Recognize how purely competitive conditions in product and resource markets lead to efficient outcomes in terms of resource use and income distribution.

Understand the principles of resource pricing and its impact on income distribution.

Identify and explain the concept of marginal productivity and its role in income distribution and resource allocation.

Analyze the effects of technology on employment and the substitution and complementarity between capital and labor.

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