Question 1

Cigarette companies favored a ban on cigarette advertising.

Accepted Answer

A) True 
 B)False

Question 2

A monopoly faces the following demand function: Q = 100 - p + sqrt(A),where A equals the dollar amount spent on advertising.If the cost function is A + 10 + 2Q,what are the profit-maximizing levels of price,output,and advertising? Compare this outcome to the case where the firm does not advertise at all.

Accepted Answer

(1)π = (100 - Q + sqrt(A))Q - 10 - 2Q -

Question 3

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 4

If the price of business broadband is greater than that of residential broadband,all else equal,

Accepted Answer

A)  business has greater price elasticity than residential. 
B)  residential has greater price elasticity than business. 
C)  both have positive income elasticity. 
D)  generally speaking, broadband is equally priced. 
A)  business has greater price elasticity than residential. 
B)  residential has greater price elasticity than business. 
C)  both have positive income elasticity. 
D)  generally speaking, broadband is equally priced.

Question 5

Which of the following is an example for group price discrimination?

Accepted Answer

A)  a BMW selling for more than a VW 
B)  local residents receiving a discount at the local golf course 
C)  the fact that a razor is cheap and blades are expensive 
D)  a hotel charging more for a room if the customers bring pets 
A)  a BMW selling for more than a VW 
B)  local residents receiving a discount at the local golf course 
C)  the fact that a razor is cheap and blades are expensive 
D)  a hotel charging more for a room if the customers bring pets

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

A perfect-price-discriminating equilibrium maximizes

Accepted Answer

A)  consumer surplus. 
B)  the associated deadweight loss. 
C)  the market inefficiency. 
D)  total welfare. 
A)  consumer surplus. 
B)  the associated deadweight loss. 
C)  the market inefficiency. 
D)  total welfare.

Question 9

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

Accepted Answer

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

Question 10

-Bob is the only carpet installer in a small isolated town.The above figure shows the demand curves of two distinct groups of customers-residential and business.If the marginal cost of installing carpet is a constant $1 per sq yard,what price does Bob charge each segment?

Accepted Answer

A)  $1 in each market 
B)  $5.50 in the residential market and $8 in the business market 
C)  $1 in the residential market and $5 in the business market 
D)  $10 in the residential market and $15 in the business market 
A)  $1 in each market 
B)  $5.50 in the residential market and $8 in the business market 
C)  $1 in the residential market and $5 in the business market 
D)  $10 in the residential market and $15 in the business market

Question 11

If somebody posing as a vacationer were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

Accepted Answer

A)  group price discrimination on the part of airlines would no longer be profitable. 
B)  group price discrimination on the part of airlines would no longer be profit maximizing. 
C)  the airlines would respond by raising further the price charged to business flyers. 
D)  this person would not earn any economic profit. 
A)  group price discrimination on the part of airlines would no longer be profitable. 
B)  group price discrimination on the part of airlines would no longer be profit maximizing. 
C)  the airlines would respond by raising further the price charged to business flyers. 
D)  this person would not earn any economic profit.

Question 12

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.

Accepted Answer

The marginal cost of providing a hotel s

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Under what conditions would firms be likely to support an industry-wide advertising ban?

Accepted Answer

If advertising only takes share away fro

Question 15

Two-part tariffs allow the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Accepted Answer

A) True 
 B)False

Question 16

Declining-block quantity discrimination makes sense if

Accepted Answer

A)  buyers of smaller quantities are more price sensitive than buyers of larger quantities. 
B)  buyers of smaller quantities are less price sensitive than buyers of larger quantities. 
C)  demand for the good is perfectly elastic. 
D)  the lower price for larger quantities encourages all consumers to purchase the larger quantity. 
A)  buyers of smaller quantities are more price sensitive than buyers of larger quantities. 
B)  buyers of smaller quantities are less price sensitive than buyers of larger quantities. 
C)  demand for the good is perfectly elastic. 
D)  the lower price for larger quantities encourages all consumers to purchase the larger quantity.

Question 17

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 18

If consumers are identical,then

Accepted Answer

A)  price discrimination is impossible. 
B)  price discrimination can occur if each consumer has a downward-sloping demand curve for the product. 
C)  perfect price discrimination is the only form of price discrimination that can increase a monopoly's profit. 
D)  tie-in sales cannot increase a monopoly's profit. 
A)  price discrimination is impossible. 
B)  price discrimination can occur if each consumer has a downward-sloping demand curve for the product. 
C)  perfect price discrimination is the only form of price discrimination that can increase a monopoly's profit. 
D)  tie-in sales cannot increase a monopoly's profit.

Question 19

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 20

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one.This is necessarily an example of quantity discrimination.

Accepted Answer

A) True 
 B)False

Cigarette companies favored a ban on cigarette advertising.

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

If the price of business broadband is greater than that of residential broadband,all else equal,

Which of the following is an example for group price discrimination?

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

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

A perfect-price-discriminating equilibrium maximizes

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

-Bob is the only carpet installer in a small isolated town.The above figure shows the demand curves of two distinct groups of customers-residential and business.If the marginal cost of installing carpet is a constant $1 per sq yard,what price does Bob charge each segment?

If somebody posing as a vacationer were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

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.

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

Under what conditions would firms be likely to support an industry-wide advertising ban?

Two-part tariffs allow the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Declining-block quantity discrimination makes sense if

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

If consumers are identical,then

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

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one.This is necessarily an example of quantity discrimination.

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

Cigarette companies favored a ban on cigarette advertising.

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

If the price of business broadband is greater than that of residential broadband,all else equal,

Which of the following is an example for group price discrimination?

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

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

A perfect-price-discriminating equilibrium maximizes

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

-Bob is the only carpet installer in a small isolated town.The above figure shows the demand curves of two distinct groups of customers-residential and business.If the marginal cost of installing carpet is a constant $1 per sq yard,what price does Bob charge each segment?

If somebody posing as a vacationer were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

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.

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

Under what conditions would firms be likely to support an industry-wide advertising ban?

Two-part tariffs allow the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Declining-block quantity discrimination makes sense if

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

If consumers are identical,then

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

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one.This is necessarily an example of quantity discrimination.

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