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

Suppose a monopoly's inverse demand curve is P = 100 -Q,it produces a product with a constant marginal cost of 20,and it has no fixed costs.How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing?

Accepted Answer

A)  The deadweight loss is smaller by 800. 
B)  The deadweight loss is greater by 800. 
C)  The deadweight loss is smaller by 1600. 
D)  The deadweight loss is greater by 1600. 
A)  The deadweight loss is smaller by 800. 
B)  The deadweight loss is greater by 800. 
C)  The deadweight loss is smaller by 1600. 
D)  The deadweight loss is greater by 1600.

Question 3

The effect on total market demand from the advertising of a specific brand will

Accepted Answer

A)  always be positive. 
B)  always be negative. 
C)  often be positive. 
D)  often be negative. 
A)  always be positive. 
B)  always be negative. 
C)  often be positive. 
D)  often be negative.

Question 4

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

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 5

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

Accepted Answer

A)  bundling. 
B)  a requirement tie-in sale. 
C)  nonlinear pricing. 
D)  two-part pricing. 
A)  bundling. 
B)  a requirement tie-in sale. 
C)  nonlinear pricing. 
D)  two-part pricing.

Question 6

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

Accepted Answer

A)  Online retailers engage in more price discrimination. 
B)  Brick-and-mortar retailers engage in more price discrimination. 
C)  Brick and mortar retailers may have higher costs. 
D)  Online retailers are more likely to have steep demand curves. 
A)  Online retailers engage in more price discrimination. 
B)  Brick-and-mortar retailers engage in more price discrimination. 
C)  Brick and mortar retailers may have higher costs. 
D)  Online retailers are more likely to have steep demand curves.

Question 7

A firm will increase its spending on advertising until

Accepted Answer

A)  it has monopolized the market. 
B)  it has deterred all future entry. 
C)  the marginal benefit of advertising is zero. 
D)  the marginal benefit of advertising equals the marginal cost of advertising. 
A)  it has monopolized the market. 
B)  it has deterred all future entry. 
C)  the marginal benefit of advertising is zero. 
D)  the marginal benefit of advertising equals the marginal cost of advertising.

Question 8

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 separately,the profit maximizing prices are

Accepted Answer

A)  television $100 and Internet services $60. 
B)  television $80 and Internet services $100. 
C)  television $80 and Internet services $60. 
D)  television $100 and Internet services $100. 
A)  television $100 and Internet services $60. 
B)  television $80 and Internet services $100. 
C)  television $80 and Internet services $60. 
D)  television $100 and Internet services $100.

Question 9

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

Setting MR = 1 in both markets

Question 10

An electric utility is going to use a block-pricing schedule.They plan to charge P1 for the first Q1 units and P2 for the subsequent units.The units sold at P2 are the total units sold,Q2,minus the total units sold at P1.The inverse demand curve is P = $100 - Q,and the marginal and average cost is $40.Use calculus to solve for P1,P2,Q1,Q2.

Accepted Answer

The profit equation for this utility is

Question 11

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 12

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 13

-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?

Accepted Answer

Social welfare equals
Perfect competitio

Question 14

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

Accepted Answer

A)  is maximized. 
B)  is lower than in a perfectly competitive market. 
C)  is higher than in a perfectly competitive market. 
D)  is minimized. 
A)  is maximized. 
B)  is lower than in a perfectly competitive market. 
C)  is higher than in a perfectly competitive market. 
D)  is minimized.

Question 15

What is the primary difference between bundling and tie-ins?

Accepted Answer

A)  Bundling is typically a one-off purchase. 
B)  Contractual arrangements. 
C)  Tie-ins are one-off purchases. 
D)  Bundling is illegal and tie-ins are legal. 
A)  Bundling is typically a one-off purchase. 
B)  Contractual arrangements. 
C)  Tie-ins are one-off purchases. 
D)  Bundling is illegal and tie-ins are legal.

Question 16

If a firm offers a senior citizen discount,

Accepted Answer

A)  the firm expects the average senior citizen to have a lower price elasticity of demand. 
B)  the firm expects the average senior citizen to have a higher price elasticity of demand. 
C)  senior citizens may be offended. 
D)  it may be prosecuted for discrimination. 
A)  the firm expects the average senior citizen to have a lower price elasticity of demand. 
B)  the firm expects the average senior citizen to have a higher price elasticity of demand. 
C)  senior citizens may be offended. 
D)  it may be prosecuted for discrimination.

Question 17

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

Accepted Answer

A)  $140. 
B)  $160. 
C)  $180. 
D)  None of the above since pure bundling is not profit maximizing in this case. 
A)  $140. 
B)  $160. 
C)  $180. 
D)  None of the above since pure bundling is not profit maximizing in this case.

Question 18

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 19

Price discrimination is welfare reducing.

Accepted Answer

A)  False, price discrimination can increase the coverage of a market thereby increasing welfare. 
B)  False, price discrimination limits the coverage of a market thereby increasing welfare. 
C)  True, price discrimination limits the coverage of a market thereby increasing welfare. 
D)  True, price discrimination can increase the coverage of a market thereby increasing welfare. 
A)  False, price discrimination can increase the coverage of a market thereby increasing welfare. 
B)  False, price discrimination limits the coverage of a market thereby increasing welfare. 
C)  True, price discrimination limits the coverage of a market thereby increasing welfare. 
D)  True, price discrimination can increase the coverage of a market thereby increasing welfare.

Question 20

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

Accepted Answer

A)  $8.33. 
B)  $27. 
C)  $15. 
D)  Impossible to tell. 
A)  $8.33. 
B)  $27. 
C)  $15. 
D)  Impossible to tell.

A monopoly will not be able to perfectly price discriminate if

Suppose a monopoly's inverse demand curve is P = 100 -Q,it produces a product with a constant marginal cost of 20,and it has no fixed costs.How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing?

The effect on total market demand from the advertising of a specific brand will

-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 photograph processing machine company requiring customers who buy a processing machine to purchase chemicals and photographic paper from it is an example of

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

A firm will increase its spending on advertising until

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?

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

-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?

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

What is the primary difference between bundling and tie-ins?

If a firm offers a senior citizen discount,

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

Price discrimination is welfare reducing.

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

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

A monopoly will not be able to perfectly price discriminate if

Suppose a monopoly's inverse demand curve is P = 100 -Q,it produces a product with a constant marginal cost of 20,and it has no fixed costs.How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing?

The effect on total market demand from the advertising of a specific brand will

-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 photograph processing machine company requiring customers who buy a processing machine to purchase chemicals and photographic paper from it is an example of

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

A firm will increase its spending on advertising until

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?

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

-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?

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

What is the primary difference between bundling and tie-ins?

If a firm offers a senior citizen discount,

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

Price discrimination is welfare reducing.

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

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