Question 1

Suppose group price discrimination is possible; however,a firm sets the same price in each market.As a result,

Accepted Answer

A)  price elasticity of demand is the same in each market. 
B)  the price-inelastic market will buy zero units. 
C)  marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market. 
D)  the deadweight loss is less than if the firm price discriminated. 
A)  price elasticity of demand is the same in each market. 
B)  the price-inelastic market will buy zero units. 
C)  marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market. 
D)  the deadweight loss is less than if the firm price discriminated.

Question 2

What is one reason consumers might demand a discount for quantity purchases?

Accepted Answer

A)  higher storage costs 
B)  lower marginal cost 
C)  lower marginal benefit 
D)  price gouging 
A)  higher storage costs 
B)  lower marginal cost 
C)  lower marginal benefit 
D)  price gouging

Question 3

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.If the firm will charge a monthly access fee plus a per hour rate,the monthly access fee will equal

Accepted Answer

A)  $1. 
B)  $5. 
C)  $8. 
D)  $16. 
A)  $1. 
B)  $5. 
C)  $8. 
D)  $16.

Question 4

At the current price of a good,Al's consumer surplus equals 15 and Ben's consumer surplus equals 15.By using two-part pricing,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 5

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 6

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.Which strategy yields the maximum profit,and what maximum profit is obtained?

Accepted Answer

A)  Sell separately and make a profit of $340. 
B)  Sell separately and make a profit of $280. 
C)  Bundle and make a profit of $320. 
D)  Bundle and make a profit of $360. 
A)  Sell separately and make a profit of $340. 
B)  Sell separately and make a profit of $280. 
C)  Bundle and make a profit of $320. 
D)  Bundle and make a profit of $360.

Question 7

If you purchase one pound of apples the price is $1.50 per pound.If you buy a five pound bag of apples,the cost is $5.00.This is most likely an example of

Accepted Answer

A)  quantity discounts. 
B)  lower marginal cost. 
C)  lower marginal benefit. 
D)  price gouging. 
A)  quantity discounts. 
B)  lower marginal cost. 
C)  lower marginal benefit. 
D)  price gouging.

Question 8

What is a primary difference between rebates and coupons?

Accepted Answer

A)  Coupons allow individuals to sort themselves into the high-elasticity group after the sale. 
B)  Neither coupons nor rebates are redeemed in high numbers. 
C)  Rebates allow individuals to sort themselves into the high-elasticity group after the sale. 
D)  Coupons are legal and rebates are illegal. 
A)  Coupons allow individuals to sort themselves into the high-elasticity group after the sale. 
B)  Neither coupons nor rebates are redeemed in high numbers. 
C)  Rebates allow individuals to sort themselves into the high-elasticity group after the sale. 
D)  Coupons are legal and rebates are illegal.

Question 9

Pizza joints often offer substantially lower prices for pizza picked up at the shop compared to delivered pizza prices.This may be an attempt at

Accepted Answer

A)  perfect price discrimination. 
B)  group price discrimination. 
C)  quantity discrimination. 
D)  second-degree price discrimination. 
A)  perfect price discrimination. 
B)  group price discrimination. 
C)  quantity discrimination. 
D)  second-degree price discrimination.

Question 10

A perfect price discriminator receives a price equal to marginal revenue for each unit.

Accepted Answer

A) True 
 B)False

Question 11

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 12

A firm's advertising can help rivals

Accepted Answer

A)  if it focuses on a general problem that the product addresses. 
B)  if it focuses on a secret ingredient that only this firm possesses. 
C)  if rivals do not advertise. 
D)  if rivals advertise. 
A)  if it focuses on a general problem that the product addresses. 
B)  if it focuses on a secret ingredient that only this firm possesses. 
C)  if rivals do not advertise. 
D)  if rivals advertise.

Question 13

If Ben values good X more than good Y,and Catherine values good Y more than good X,a firm can increase its profits by

Accepted Answer

A)  charging the same price for both goods. 
B)  bundling the goods. 
C)  selling the goods in a competitive market. 
D)  charging one price per good. 
A)  charging the same price for both goods. 
B)  bundling the goods. 
C)  selling the goods in a competitive market. 
D)  charging one price per good.

Question 14

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 PA = 10 - QA,and the inverse demand curve for group B is PB = 18 - QB.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 monopolist is able to practice group price discrimination,the values of the elasticities of the two groups at the profit-maximizing prices are

Accepted Answer

A)  εA = -1.25, and εB = -1.5. 
B)  εA = -1.5, and εB = -1.25. 
C)  εA = -0.67, and εB = -0.8. 
D)  εA = -0.8, and εB = -0.67. 
A)  εA = -1.25, and εB = -1.5. 
B)  εA = -1.5, and εB = -1.25. 
C)  εA = -0.67, and εB = -0.8. 
D)  εA = -0.8, and εB = -0.67.

Question 15

If two markets have the same price elasticity of demand at every price,a monopoly will not practice multimarket price discrimination.

Accepted Answer

A) True 
 B)False

Question 16

A monopolist has a marginal cost of $10 and no fixed cost.It faces the following inverse demand curve: p = 80 - q.The monopolist can engage in an advertising campaign that leads to a new inverse demand curve represented by p = 100 - q.What is the maximum amount that the monopolist is willing to spend in this campaign?

Accepted Answer

A)  $650 
B)  $800 
C)  $1,000 
D)  It cannot be determined. 
A)  $650 
B)  $800 
C)  $1,000 
D)  It cannot be determined.

Question 17

Tie-in sales are most advantageous to the seller when

Accepted Answer

A)  the demands for the two goods are negatively correlated. 
B)  the demands for the two goods are positively correlated. 
C)  the demands for the two goods are unrelated. 
D)  there are economies of scope. 
A)  the demands for the two goods are negatively correlated. 
B)  the demands for the two goods are positively correlated. 
C)  the demands for the two goods are unrelated. 
D)  there are economies of scope.

Question 18

A perfect-price-discriminating monopoly's marginal revenue curve

Accepted Answer

A)  lies below the demand curve. 
B)  is the demand curve. 
C)  varies for each consumer. 
D)  is the same as the monopolist's marginal revenue curve. 
A)  lies below the demand curve. 
B)  is the demand curve. 
C)  varies for each consumer. 
D)  is the same as the monopolist's marginal revenue curve.

Question 19

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

Accepted Answer

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

Question 20

A firm that holds a monopoly in both goods stands to gain from a tie-in sale.

Accepted Answer

A)  True. 
B)  False. 
C)  True, which is why anti-trust laws exist. 
D)  False, there are no dual monopolies. 
A)  True. 
B)  False. 
C)  True, which is why anti-trust laws exist. 
D)  False, there are no dual monopolies.

Suppose group price discrimination is possible; however,a firm sets the same price in each market.As a result,

What is one reason consumers might demand a discount for quantity purchases?

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

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

If you purchase one pound of apples the price is $1.50 per pound.If you buy a five pound bag of apples,the cost is $5.00.This is most likely an example of

What is a primary difference between rebates and coupons?

Pizza joints often offer substantially lower prices for pizza picked up at the shop compared to delivered pizza prices.This may be an attempt at

A perfect price discriminator receives a price equal to marginal revenue for each unit.

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.

A firm's advertising can help rivals

If Ben values good X more than good Y,and Catherine values good Y more than good X,a firm can increase its profits by

If two markets have the same price elasticity of demand at every price,a monopoly will not practice multimarket price discrimination.

Tie-in sales are most advantageous to the seller when

A perfect-price-discriminating monopoly's marginal revenue curve

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

A firm that holds a monopoly in both goods stands to gain from a tie-in sale.

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 12: Pricing and Advertising

Suppose group price discrimination is possible; however,a firm sets the same price in each market.As a result,

What is one reason consumers might demand a discount for quantity purchases?

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

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

If you purchase one pound of apples the price is $1.50 per pound.If you buy a five pound bag of apples,the cost is $5.00.This is most likely an example of

What is a primary difference between rebates and coupons?

Pizza joints often offer substantially lower prices for pizza picked up at the shop compared to delivered pizza prices.This may be an attempt at

A perfect price discriminator receives a price equal to marginal revenue for each unit.

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.

A firm's advertising can help rivals

If Ben values good X more than good Y,and Catherine values good Y more than good X,a firm can increase its profits by

If two markets have the same price elasticity of demand at every price,a monopoly will not practice multimarket price discrimination.

Tie-in sales are most advantageous to the seller when

A perfect-price-discriminating monopoly's marginal revenue curve

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

A firm that holds a monopoly in both goods stands to gain from a tie-in sale.

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters