Question 1

The more block prices a monopoly can set instead of setting a single price,

Accepted Answer

A)  the smaller the deadweight loss. 
B)  the more producer surplus. 
C)  the larger the total welfare. 
D)  All of the above. 
A)  the smaller the deadweight loss. 
B)  the more producer surplus. 
C)  the larger the total welfare. 
D)  All of the above.

Question 2

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

Accepted Answer

A)  used to attack the rivals' products. 
B)  collectively undertaken by the industry group. 
C)  strategically aimed at deterring entry. 
D)  focused on secret ingredients. 
A)  used to attack the rivals' products. 
B)  collectively undertaken by the industry group. 
C)  strategically aimed at deterring entry. 
D)  focused on secret ingredients.

Question 3

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible,a firm with market power will

Accepted Answer

A)  set a higher price in the market that is more price elastic. 
B)  set a lower price in the market that is more price elastic. 
C)  set price so as to equate the elasticity of demand across markets. 
D)  set price equal to marginal cost in both markets. 
A)  set a higher price in the market that is more price elastic. 
B)  set a lower price in the market that is more price elastic. 
C)  set price so as to equate the elasticity of demand across markets. 
D)  set price equal to marginal cost in both markets.

Question 4

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 5

Relative to a single-price monopoly,the effect of group price discrimination on social welfare is

Accepted Answer

A)  beneficial. 
B)  detrimental. 
C)  neutral. 
D)  ambiguous. 
A)  beneficial. 
B)  detrimental. 
C)  neutral. 
D)  ambiguous.

Question 6

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

Accepted Answer

A)  because the demands for these two goods are positively correlated 
B)  because the demands for these two goods are negatively correlated 
C)  because the demands for these two goods are independent 
D)  It violates the Clean Food Act of 1908. 
A)  because the demands for these two goods are positively correlated 
B)  because the demands for these two goods are negatively correlated 
C)  because the demands for these two goods are independent 
D)  It violates the Clean Food Act of 1908.

Question 7

A weapons producer sells guns to two countries that are at war with each other.The guns can be produced at a constant marginal cost of $10.The demand for guns from the two countries can be represented as:
QA = 100 - 2p
QB = 80 - 4p
Why is the weapons producer able to price discriminate?
What price will it charge to each country?

Accepted Answer

The firm can price discriminate because

Question 8

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Accepted Answer

A)  airlines would charge the same price to each type of flyer. 
B)  airlines would still charge business flyers a higher fare since the traveler's employer pays anyway. 
C)  airlines would be driven out of business. 
D)  airlines would counter by charging vacationers a higher fare. 
A)  airlines would charge the same price to each type of flyer. 
B)  airlines would still charge business flyers a higher fare since the traveler's employer pays anyway. 
C)  airlines would be driven out of business. 
D)  airlines would counter by charging vacationers a higher fare.

Question 9

Purchasing a season pass to the local symphony

Accepted Answer

A)  is an example of first degree price discrimination. 
B)  is an example of second degree price discrimination. 
C)  is an example of third degree price discrimination. 
D)  All of the above. 
A)  is an example of first degree price discrimination. 
B)  is an example of second degree price discrimination. 
C)  is an example of third degree price discrimination. 
D)  All of the above.

Question 10

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 yields total revenue of

Accepted Answer

A)  $24. 
B)  $40. 
C)  $16. 
D)  $32. 
A)  $24. 
B)  $40. 
C)  $16. 
D)  $32.

Question 11

Which of the following sellers is most able to perfectly price discriminate?

Accepted Answer

A)  a college or university 
B)  the post office 
C)  a clothing store 
D)  a grocery supermarket 
A)  a college or university 
B)  the post office 
C)  a clothing store 
D)  a grocery supermarket

Question 12

Historically,price discrimination was considered illegal in all instances.More recently,antitrust authorities have discovered that

Accepted Answer

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

Question 13

Advertising that has the fine print "professional driver on a closed course,"

Accepted Answer

A)  is likely engaged in persuasive advertising. 
B)  is likely engaged in informative advertising. 
C)  is likely engaged in strategic advertising. 
D)  is likely engaged in false advertising. 
A)  is likely engaged in persuasive advertising. 
B)  is likely engaged in informative advertising. 
C)  is likely engaged in strategic advertising. 
D)  is likely engaged in false advertising.

Question 14

When firms price discriminate they turn ________ into ________.

Accepted Answer

A)  producer surplus, revenue 
B)  consumer surplus, profit 
C)  total cost, profit 
D)  producer surplus, consumer surplus 
A)  producer surplus, revenue 
B)  consumer surplus, profit 
C)  total cost, profit 
D)  producer surplus, consumer surplus

Question 15

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 practices group price discrimination,the profit maximizing prices charged to each type of customer are

Accepted Answer

A)  PA = 6, and PB = 10. 
B)  PA = 4 and PB = 8. 
C)  PA = 10, and PB = 6. 
D)  PA = 8, and PB = 4. 
A)  PA = 6, and PB = 10. 
B)  PA = 4 and PB = 8. 
C)  PA = 10, and PB = 6. 
D)  PA = 8, and PB = 4.

Question 16

Mouthwash is sold in 24 oz bottles for $2.40 and in 12 oz.bottles for $1.20.This represents

Accepted Answer

A)  price differentiation. 
B)  price discrimination. 
C)  marginal cost pricing. 
D)  None of the above. 
A)  price differentiation. 
B)  price discrimination. 
C)  marginal cost pricing. 
D)  None of the above.

Question 17

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.

Question 18

If a market is controlled by a perfect-price-discriminating monopoly,then

Accepted Answer

A)  a deadweight loss is generated. 
B)  there is no consumer surplus. 
C)  consumer surplus is the same as under perfect competition. 
D)  output is less than that of a single-price monopoly. 
A)  a deadweight loss is generated. 
B)  there is no consumer surplus. 
C)  consumer surplus is the same as under perfect competition. 
D)  output is less than that of a single-price monopoly.

Question 19

Explain why advertising that results in spuriously differentiated products may result in a deadweight loss to total welfare.

Accepted Answer

The firm spends money to steal customers

Question 20

A firm advertising using an expensive,famous spokesperson is often

Accepted Answer

A)  aimed to raise rivals' costs. 
B)  used to increase the total market demand. 
C)  used to steal customers from rivals. 
D)  used to focus on general problems the product addresses. 
A)  aimed to raise rivals' costs. 
B)  used to increase the total market demand. 
C)  used to steal customers from rivals. 
D)  used to focus on general problems the product addresses.

The more block prices a monopoly can set instead of setting a single price,

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

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible,a firm with market power will

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

Relative to a single-price monopoly,the effect of group price discrimination on social welfare is

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Purchasing a season pass to the local symphony

Which of the following sellers is most able to perfectly price discriminate?

Historically,price discrimination was considered illegal in all instances.More recently,antitrust authorities have discovered that

Advertising that has the fine print "professional driver on a closed course,"

When firms price discriminate they turn into .

Mouthwash is sold in 24 oz bottles for $2.40 and in 12 oz.bottles for $1.20.This represents

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

If a market is controlled by a perfect-price-discriminating monopoly,then

Explain why advertising that results in spuriously differentiated products may result in a deadweight loss to total welfare.

A firm advertising using an expensive,famous spokesperson is often

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

The more block prices a monopoly can set instead of setting a single price,

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

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible,a firm with market power will

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

Relative to a single-price monopoly,the effect of group price discrimination on social welfare is

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Purchasing a season pass to the local symphony

Which of the following sellers is most able to perfectly price discriminate?

Historically,price discrimination was considered illegal in all instances.More recently,antitrust authorities have discovered that

Advertising that has the fine print "professional driver on a closed course,"

When firms price discriminate they turn ________ into ________.

Mouthwash is sold in 24 oz bottles for $2.40 and in 12 oz.bottles for $1.20.This represents

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

If a market is controlled by a perfect-price-discriminating monopoly,then

Explain why advertising that results in spuriously differentiated products may result in a deadweight loss to total welfare.

A firm advertising using an expensive,famous spokesperson is often

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

When firms price discriminate they turn into .