Question 1

A monopoly will not be able to perfectly price discriminate if

Accepted Answer

A)  obtaining information about each buyer's reservation price is too costly. 
B)  demand is very elastic. 
C)  demand is very inelastic. 
D)  resale is impossible. 
A)  obtaining information about each buyer's reservation price is too costly. 
B)  demand is very elastic. 
C)  demand is very inelastic. 
D)  resale is impossible.

Question 2

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible,a firm with market power will

Accepted Answer

A)  set a higher price in the market that is more price elastic. 
B)  set a lower price in the market that is more price elastic. 
C)  set price so as to equate the elasticity of demand across markets. 
D)  set price equal to marginal cost in both markets. 
A)  set a higher price in the market that is more price elastic. 
B)  set a lower price in the market that is more price elastic. 
C)  set price so as to equate the elasticity of demand across markets. 
D)  set price equal to marginal cost in both markets.

Question 3

The sales of shoes that include shoelaces is a tie-in sale that most likely

Accepted Answer

A)  greatly increases the shoe producer's profit. 
B)  increases transactions costs. 
C)  increases efficiency. 
D)  None of the above. 
A)  greatly increases the shoe producer's profit. 
B)  increases transactions costs. 
C)  increases efficiency. 
D)  None of the above.

Question 4

Suppose all individuals are identical,and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month.The firm faces a constant marginal cost of $1.Potential consumer surplus equals

Accepted Answer

A)  $4. 
B)  $8. 
C)  $16. 
D)  $32. 
A)  $4. 
B)  $8. 
C)  $16. 
D)  $32.

Question 5

Suppose two countries,A and B,are at war with each other.Country A is very wealthy; country B is very poor.The XYZ Co.produces tanks.Is XYZ able to set a different price for the tank sold to country A than the price for the tank sold to country B? Explain.

Accepted Answer

XYZ can practice multimarket p

Question 6

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

Accepted Answer

A)  identify customers with apparently more elastic demand and offer them a lower price. 
B)  retain loyal customers who are not price sensitive. 
C)  offer discounts to consumers who buy larger quantities. 
D)  perfectly price discriminate. 
A)  identify customers with apparently more elastic demand and offer them a lower price. 
B)  retain loyal customers who are not price sensitive. 
C)  offer discounts to consumers who buy larger quantities. 
D)  perfectly price discriminate.

Question 7

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

Accepted Answer

First,price discrimination allows a firm

Question 8

Which of the following is NOT an example for third-degree price discrimination?

Accepted Answer

A)  discounted coupons for toothpastes in the newspapers 
B)  discounts for Saturday night stayovers 
C)  discounts for bulk orders 
D)  discounts for senior citizens at amusement parks 
A)  discounted coupons for toothpastes in the newspapers 
B)  discounts for Saturday night stayovers 
C)  discounts for bulk orders 
D)  discounts for senior citizens at amusement parks

Question 9

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,compared to a monopoly who charges a single price,the change in producer surplus is

Accepted Answer

A)  B + D. 
B)  A. 
C)  A + C + E. 
D)  B + C + D + E. 
A)  B + D. 
B)  A. 
C)  A + C + E. 
D)  B + C + D + E.

Question 10

A perfect price discriminator

Accepted Answer

A)  charges each buyer her reservation price. 
B)  charges different prices to each customer based upon different costs of delivery. 
C)  generates a deadweight loss to society. 
D)  charges lower prices to customers who buy greater quantities. 
A)  charges each buyer her reservation price. 
B)  charges different prices to each customer based upon different costs of delivery. 
C)  generates a deadweight loss to society. 
D)  charges lower prices to customers who buy greater quantities.

Question 11

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,compared to a monopoly who charges a single price,the change in consumer surplus is

Accepted Answer

A)  A. 
B)  A + B + C. 
C)  A + B + C + D + E. 
D)  zero. 
A)  A. 
B)  A + B + C. 
C)  A + B + C + D + E. 
D)  zero.

Question 12

At the current price of a good,Al's consumer surplus equals eight,and Ben's consumer surplus equals 15.By charging a two-part tariff,a monopolist could increase his profit by

Accepted Answer

A)  8. 
B)  16. 
C)  15. 
D)  30. 
A)  8. 
B)  16. 
C)  15. 
D)  30.

Question 13

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities,then

Accepted Answer

A)  consumers that buy larger quantities have a higher price elasticity of demand. 
B)  consumers that buy larger quantities have a lower price elasticity of demand. 
C)  consumers that buy smaller quantities have a lower price elasticity of demand. 
D)  Both A and C. 
A)  consumers that buy larger quantities have a higher price elasticity of demand. 
B)  consumers that buy larger quantities have a lower price elasticity of demand. 
C)  consumers that buy smaller quantities have a lower price elasticity of demand. 
D)  Both A and C.

Question 14

A photograph processing machine company requiring customers that buy a processing machine to purchase chemicals and photographic paper from them is an example of

Accepted Answer

A)  bundling. 
B)  a requirement tie-in sale. 
C)  quantity discrimination. 
D)  a two-part tariff. 
A)  bundling. 
B)  a requirement tie-in sale. 
C)  quantity discrimination. 
D)  a two-part tariff.

Question 15

A specialized rice grower sells rice in two markets,the United States and Japan,and the marginal cost the same in both markets.The price elasticity of demand in the United States is -2.0,and the price elasticity of demand in Japan is -1.5.If the grower practices multimarket price discrimination,which country's consumers will pay a higher price and by how much?

Accepted Answer

pᵤs(1 + 1/-2)= pⱼ(1 + 1/-1.5).

Question 16

Airlines offer lower prices to vacationers than to business travelers because

Accepted Answer

A)  of government regulations requiring them to do so. 
B)  business travelers do not care at all about costs. 
C)  business travelers are less flexible in their travel plans than vacationers are. 
D)  airlines know that business travelers enjoy flying more than vacationers do. 
A)  of government regulations requiring them to do so. 
B)  business travelers do not care at all about costs. 
C)  business travelers are less flexible in their travel plans than vacationers are. 
D)  airlines know that business travelers enjoy flying more than vacationers do.

Question 17

For the following, please answer "True" or "False" and explain why.
-A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus.

Accepted Answer

A) True 
 B)False

Question 18

At many municipal golf courses,local residents pay a lower fee to play than other golfers do.One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Accepted Answer

A)  they can check the identification cards of golfers. 
B)  local resident golfers and other golfers have the same price elasticity of demand to play at the municipal course. 
C)  there are many golf courses nearby from which golfers can choose. 
D)  they require all golfers to rent a cart. 
A)  they can check the identification cards of golfers. 
B)  local resident golfers and other golfers have the same price elasticity of demand to play at the municipal course. 
C)  there are many golf courses nearby from which golfers can choose. 
D)  they require all golfers to rent a cart.

Question 19

Two-part tariffs offer a mechanism whereby the firm can

Accepted Answer

A)  charge two different prices to distinct groups of customers. 
B)  collect two times as much from consumers as a single-price monopoly can. 
C)  capture some or all of the consumer surplus. 
D)  reduce some of its fixed costs. 
A)  charge two different prices to distinct groups of customers. 
B)  collect two times as much from consumers as a single-price monopoly can. 
C)  capture some or all of the consumer surplus. 
D)  reduce some of its fixed costs.

Question 20

Consider a weapons producer that is selling guns to two countries that are at war with one another.Guns can be produced at a constant marginal cost of $10 per gun.The demand for guns in each of the countries is given by:
p = 50 - 0.5Q (Country
A)
p = 20 - 0.25Q (Country
B)
a. If the weapons producer can charge different prices to each country, what price and quantity will it sell to each?
b.	If the weapons producer cannot price discriminate, what price and quantity of guns will it sell to each country?
c.	Will the weapons manufacturer make more profit from price discriminating? Briefly explain. Why is it that the manufacturer will likely be able to price discriminate?
d.	Which country will benefit from price discrimination? Which country will be worse off from price discrimination? Explain briefly.
e.	Is the deadweight loss higher under price discrimination or a single-price? Show mathematically.

Accepted Answer

a. Qᴬ = 40,Pᴬ = 30
Qᴮ = 20,Pᴮ = 15
b.Wri

A monopoly will not be able to perfectly price discriminate if

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible,a firm with market power will

The sales of shoes that include shoelaces is a tie-in sale that most likely

Suppose all individuals are identical,and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month.The firm faces a constant marginal cost of $1.Potential consumer surplus equals

Suppose two countries,A and B,are at war with each other.Country A is very wealthy; country B is very poor.The XYZ Co.produces tanks.Is XYZ able to set a different price for the tank sold to country A than the price for the tank sold to country B? Explain.

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

Which of the following is NOT an example for third-degree price discrimination?

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,compared to a monopoly who charges a single price,the change in producer surplus is

A perfect price discriminator

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,compared to a monopoly who charges a single price,the change in consumer surplus is

At the current price of a good,Al's consumer surplus equals eight,and Ben's consumer surplus equals 15.By charging a two-part tariff,a monopolist could increase his profit by

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities,then

A photograph processing machine company requiring customers that buy a processing machine to purchase chemicals and photographic paper from them is an example of

Airlines offer lower prices to vacationers than to business travelers because

For the following, please answer "True" or "False" and explain why. -A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus.

At many municipal golf courses,local residents pay a lower fee to play than other golfers do.One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Two-part tariffs offer a mechanism whereby the firm can

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 12: Pricing and Advertising

A monopoly will not be able to perfectly price discriminate if

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible,a firm with market power will

The sales of shoes that include shoelaces is a tie-in sale that most likely

Suppose all individuals are identical,and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month.The firm faces a constant marginal cost of $1.Potential consumer surplus equals

Suppose two countries,A and B,are at war with each other.Country A is very wealthy; country B is very poor.The XYZ Co.produces tanks.Is XYZ able to set a different price for the tank sold to country A than the price for the tank sold to country B? Explain.

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

Which of the following is NOT an example for third-degree price discrimination?

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,compared to a monopoly who charges a single price,the change in producer surplus is

A perfect price discriminator

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,compared to a monopoly who charges a single price,the change in consumer surplus is

At the current price of a good,Al's consumer surplus equals eight,and Ben's consumer surplus equals 15.By charging a two-part tariff,a monopolist could increase his profit by

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities,then

A photograph processing machine company requiring customers that buy a processing machine to purchase chemicals and photographic paper from them is an example of

Airlines offer lower prices to vacationers than to business travelers because

For the following, please answer "True" or "False" and explain why. -A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus.

At many municipal golf courses,local residents pay a lower fee to play than other golfers do.One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Two-part tariffs offer a mechanism whereby the firm can

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters