Question 1

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

Accepted Answer

A)  consumer surplus is larger than under single-price monopoly. 
B)  social welfare is larger than under perfect competition. 
C)  the monopoly's profits are larger than under single-price monopoly. 
D)  the monopoly's profits are larger than under perfect price discrimination. 
A)  consumer surplus is larger than under single-price monopoly. 
B)  social welfare is larger than under perfect competition. 
C)  the monopoly's profits are larger than under single-price monopoly. 
D)  the monopoly's profits are larger than under perfect price discrimination.

Question 2

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

Accepted Answer

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

Question 3

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 monopoly uses uniform pricing,the deadweight loss is 36.If the monopolist is able to practice group price discrimination,the deadweight loss is

Accepted Answer

A)  30. 
B)  32. 
C)  34. 
D)  36. 
A)  30. 
B)  32. 
C)  34. 
D)  36.

Question 4

For a theme park a two-tier tariff can include a positive admission price and a zero per-ride fee.

Accepted Answer

A) True 
 B)False

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.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 6

Consider a car dealership advertises a three-year lease at $250 per month.When you arrive to apply,you discover that the lease requires a downpayment of $3600 dollars.You will undertake the lease if

Accepted Answer

A)  you value the lease at least $350 per month. 
B)  you value the lease at least $250 per month, the $3600 is a sunk cost. 
C)  you value the lease less than $350 per month. 
D)  you value buying a new car at $400 per month. 
A)  you value the lease at least $350 per month. 
B)  you value the lease at least $250 per month, the $3600 is a sunk cost. 
C)  you value the lease less than $350 per month. 
D)  you value buying a new car at $400 per month.

Question 7

Assume you have four tickets to a U2 concert.You decide to sell each of them separately on an auction site such as eBay.Your auctions represent

Accepted Answer

A)  price differentiation. 
B)  perfect price discrimination amongst those who bid for your tickets. 
C)  perfect price discrimination amongst all people who buy tickets for the concert. 
D)  an illegal act, subject to state and federal prosecution. 
A)  price differentiation. 
B)  perfect price discrimination amongst those who bid for your tickets. 
C)  perfect price discrimination amongst all people who buy tickets for the concert. 
D)  an illegal act, subject to state and federal prosecution.

Question 8

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

Accepted Answer

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

Question 9

If a firm sells to two distinct identifiable markets and resale is impossible,why is price discrimination more profitable than setting a single price?

Accepted Answer

If the firm charges a single price on th

Question 10

Recent research suggests that if Apple switched from uniform pricing of its iTunes to two-part pricing,

Accepted Answer

A)  total welfare would increase, but consumer surplus would decrease. 
B)  total welfare and consumer surplus would increase. 
C)  total welfare would decrease, but consumers surplus would increase. 
D)  total welfare and consumer surplus would decrease. 
A)  total welfare would increase, but consumer surplus would decrease. 
B)  total welfare and consumer surplus would increase. 
C)  total welfare would decrease, but consumers surplus would increase. 
D)  total welfare and consumer surplus would decrease.

Question 11

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part tariff with the lump sum tariff equal to the total amount of potential consumer surplus.

Accepted Answer

The producer wants to set the lump sum t

Question 12

A group price discriminator sells its product in Florida for three times the price it sets in New York.Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0,the demand in Florida

Accepted Answer

A)  has an elasticity of -6.0. 
B)  is more price elastic than the demand in New York. 
C)  has an elasticity of -1.2. 
D)  has an elasticity of -0.67. 
A)  has an elasticity of -6.0. 
B)  is more price elastic than the demand in New York. 
C)  has an elasticity of -1.2. 
D)  has an elasticity of -0.67.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

-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 15

Suppose a profit-maximizing monopoly is able to employ multimarket price discrimination.The marginal cost of providing the good is constant and the same in both markets.The marginal revenue the firm earns on the last unit sold in the market with the lower price will be

Accepted Answer

A)  greater than the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
B)  less than the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
C)  equal to the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
D)  greater than the marginal cost of the last unit. 
A)  greater than the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
B)  less than the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
C)  equal to the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
D)  greater than the marginal cost of the last unit.

Question 16

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

Accepted Answer

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

Question 17

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.Profit maximizing two-part pricing results in the firm selling

Accepted Answer

A)  4.5 hours. 
B)  10 hours. 
C)  5 hours. 
D)  8 hours. 
A)  4.5 hours. 
B)  10 hours. 
C)  5 hours. 
D)  8 hours.

Question 18

Stores such as Costco and Sam's Club require an annual membership before you can shop there.This is a form of

Accepted Answer

A)  two part pricing. 
B)  price gouging. 
C)  a tie-in sale. 
D)  anti-competitive behavior. 
A)  two part pricing. 
B)  price gouging. 
C)  a tie-in sale. 
D)  anti-competitive behavior.

Question 19

Why do firms engage in price discrimination?

Accepted Answer

A)  to decrease cost 
B)  to increase profits 
C)  to increase consumer surplus 
D)  to prohibit the resale of their products 
A)  to decrease cost 
B)  to increase profits 
C)  to increase consumer surplus 
D)  to prohibit the resale of their products

Question 20

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

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

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

For a theme park a two-tier tariff can include a positive admission price and a zero per-ride fee.

Consider a car dealership advertises a three-year lease at $250 per month.When you arrive to apply,you discover that the lease requires a downpayment of $3600 dollars.You will undertake the lease if

Assume you have four tickets to a U2 concert.You decide to sell each of them separately on an auction site such as eBay.Your auctions represent

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

If a firm sells to two distinct identifiable markets and resale is impossible,why is price discrimination more profitable than setting a single price?

Recent research suggests that if Apple switched from uniform pricing of its iTunes to two-part pricing,

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part tariff with the lump sum tariff equal to the total amount of potential consumer surplus.

A group price discriminator sells its product in Florida for three times the price it sets in New York.Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0,the demand in Florida

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

-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

Suppose a profit-maximizing monopoly is able to employ multimarket price discrimination.The marginal cost of providing the good is constant and the same in both markets.The marginal revenue the firm earns on the last unit sold in the market with the lower price will be

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

Stores such as Costco and Sam's Club require an annual membership before you can shop there.This is a form of

Why do firms engage in price discrimination?

A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus.

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

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

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

For a theme park a two-tier tariff can include a positive admission price and a zero per-ride fee.

Consider a car dealership advertises a three-year lease at $250 per month.When you arrive to apply,you discover that the lease requires a downpayment of $3600 dollars.You will undertake the lease if

Assume you have four tickets to a U2 concert.You decide to sell each of them separately on an auction site such as eBay.Your auctions represent

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

If a firm sells to two distinct identifiable markets and resale is impossible,why is price discrimination more profitable than setting a single price?

Recent research suggests that if Apple switched from uniform pricing of its iTunes to two-part pricing,

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part tariff with the lump sum tariff equal to the total amount of potential consumer surplus.

A group price discriminator sells its product in Florida for three times the price it sets in New York.Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0,the demand in Florida

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

-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

Suppose a profit-maximizing monopoly is able to employ multimarket price discrimination.The marginal cost of providing the good is constant and the same in both markets.The marginal revenue the firm earns on the last unit sold in the market with the lower price will be

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

Stores such as Costco and Sam's Club require an annual membership before you can shop there.This is a form of

Why do firms engage in price discrimination?

A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus.

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