Exam 12: Pricing and Advertising

Suppose a monopoly sells to two identifiably different types of customers,A and B,who are unable to practice arbitrage.The inverse demand curve for group A is P_A = 10 - Q_A,and the inverse demand curve for group B is P_B = 18 - Q_B.The monopolist is able to produce the good for either type of customer at a constant marginal cost of 2,and the monopolist has no fixed costs.If the monopoly uses uniform pricing,the deadweight loss is 36.If the monopolist is able to practice group price discrimination,the deadweight loss is

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,social welfare equals

A monopolist has a marginal cost of $4 and no fixed cost.It faces the following inverse demand curve: p = 40 - q.The monopolist can introduce a new packaging for its product.Such new packaging does not alter the marginal cost.It makes the product more attractive for the consumer,and it would lead to a new inverse demand curve p = 40 - 0.5q.What is the maximum amount that the monopolist would be willing to invest in this new packaging project?

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

If identical firms sell an undifferentiated product,advertising is likely to be

Airlines offer lower prices to vacationers than to business travelers because

-The above figure shows the market for a given product.Defining welfare as consumer surplus plus producer surplus,calculate the social welfare associated with perfect competition,single-price monopoly,and a perfect-price-discriminating monopoly.Which market structure(s)maximize social welfare?

Assume a company can offer customers cable television and Internet service at essentially zero marginal and average cost.The following table shows each customer's marginal willingness to pay for television,Internet services,and for a bundle containing both.If television and Internet services are sold in a pure bundle,the profit-maximizing price is

If the marginal cost of production is $10,the elasticity of demand for group 1 is -1.5,the elasticity of demand for group 2 is -2.5,and the price paid by group 1 is $15,the price for group 2 is

If firms that practice second degree price discrimination use more block prices,

While price discrimination is possible between two markets,it is not possible in more than two.

When a firm uses a form of quantity discrimination that charges large purchasers less it is the high quantity purchasers that generate most profit.

At the current price of a good,Al's consumer surplus equals 8,and Ben's consumer surplus equals 15.By using two-part pricing,a monopolist could increase his profit by

What is one reason online prices might be considerably lower than brick-and-mortar prices?

If both Ben and Catherine value good X more than good Y,a firm can increase profits by bundling the two products.

When a firm has a monopoly in a market and also perfectly price discriminates,total welfare

A firm that practices multimarket price discrimination will set the lower price in the market that has the most elastic demand.

A cheese-by-mail club that charges an annual membership fee and an additional fee per cheese shipment utilizes

A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm.Those who check in early are much more likely to use the hotel's pool.Explain why this price difference may not be price discrimination.

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,consumer surplus equals