Question 1

Which group of policies aims at extracting all consumer surplus?

Accepted Answer

A) Price discrimination and peak load pricing. 
B) Cross subsidization and brand loyalty. 
C) Price matching and randomized pricing. 
D) Two-part pricing and commodity bundling. 
A) Price discrimination and peak load pricing. 
B) Cross subsidization and brand loyalty. 
C) Price matching and randomized pricing. 
D) Two-part pricing and commodity bundling.

Question 2

As manager of the only video store in town, you have noticed that on Thursday through Sunday the demand for renting your movies is much higher than it is on Monday through Wednesday.You therefore conducted a study that revealed two different market demand curves.On weekends, your inverse demand curve is

Accepted Answer

@#IMG-DLM& ; on weekdays, it is @#IMG-DLM& .The marginal cos

Question 3

Cinemas sometimes give senior citizens discounts.What is the possible privately motivated purpose for them to do so?

Accepted Answer

A) Purely because entrepreneurs are benevolent. 
B) Senior citizens have a more elastic demand for movies than ordinary citizens. 
C) Senior citizens lack recreational activities. 
D) None of the statements associated with this question are correct. 
A) Purely because entrepreneurs are benevolent. 
B) Senior citizens have a more elastic demand for movies than ordinary citizens. 
C) Senior citizens lack recreational activities. 
D) None of the statements associated with this question are correct.

Question 4

What are the profits of the monopoly in equilibrium?

Accepted Answer

A) $225. 
B) $120. 
C) $345. 
D) None of the statements associated with this question are correct. 
A) $225. 
B) $120. 
C) $345. 
D) None of the statements associated with this question are correct.

Question 5

Many restaurants have found that it is advantageous to offer free appetizers with a two-drink minimum during a limited number of hours.Is this profit-maximizing behavior? Why or why not?

Accepted Answer

Yes, it probably is.This is a

Question 6

Grocery stores make most of their profits on soft drinks, beer, chips, and candy.A casual look at prices of these items reveals that these prices change extremely often and can vary as much as 50 percent.Is this because the wholesale price of these items fluctuates this dramatically, or is there some other possible explanation?

Accepted Answer

The frequent variation in prices on soft

Question 7

What price should a firm charge for a package of two shirts given a marginal cost of $2 and an inverse demand function P = 6 - 2Q by the representative consumer?

Accepted Answer

A) $2. 
B) $6. 
C) $8. 
D) $10. 
A) $2. 
B) $6. 
C) $8. 
D) $10.

Question 8

Which of the following strategies will most likely not enhance profits in a Bertrand oligopoly?

Accepted Answer

A) Two-part pricing. 
B) Price matching. 
C) Randomized pricing. 
D) Brand loyalty. 
A) Two-part pricing. 
B) Price matching. 
C) Randomized pricing. 
D) Brand loyalty.

Question 9

Which of the following is a true statement about the process of cross-subsidization, given a firm is selling two products?

Accepted Answer

A) The two products can not have interdependent demand functions. 
B) The firm will sell both of its products at prices set above costs. 
C) The firm needs cost complementarities in the production of the two goods. 
D) The firm will sell both of its products at prices set above costs and the firm needs cost complementarities in the production of the two goods. 
A) The two products can not have interdependent demand functions. 
B) The firm will sell both of its products at prices set above costs. 
C) The firm needs cost complementarities in the production of the two goods. 
D) The firm will sell both of its products at prices set above costs and the firm needs cost complementarities in the production of the two goods.

Question 10

Which of the following pricing strategies does not usually enhance the profits of firms with market power?

Accepted Answer

A) Marginal cost pricing. 
B) Price discrimination. 
C) Block pricing. 
D) Commodity bundling. 
A) Marginal cost pricing. 
B) Price discrimination. 
C) Block pricing. 
D) Commodity bundling.

Question 11

You run a golf course at a tourist resort.At your resort, there are two distinct groups of players.One group owns property at the resort and resides there most of the year.On average, each of these consumers has a monthly inverse demand for golf services of

Accepted Answer

@#IMG-DLM& .The other group visits for one week at

Question 12

Suppose that Verizon Wireless has hired you as a consultant to determine what price it should set for calling services.Suppose that an individuals' inverse demand for wireless services in the greater Boston area is estimated to be P = 100 - 33Q and the marginal cost of providing wireless services to the area is $1 per minute.What is the optimal two-part price that you would suggest to Verizon?

Accepted Answer

A) Charge a fixed fee = $95.5 and a usage fee of $1 per minute. 
B) Charge a fixed fee = $3 and a usage fee of $0.33 per minute. 
C) Charge a fixed fee = $148.50 and a usage fee of $1 per minute. 
D) Charge a fixed fee = $3 and a usage fee of $3 per minute. 
A) Charge a fixed fee = $95.5 and a usage fee of $1 per minute. 
B) Charge a fixed fee = $3 and a usage fee of $0.33 per minute. 
C) Charge a fixed fee = $148.50 and a usage fee of $1 per minute. 
D) Charge a fixed fee = $3 and a usage fee of $3 per minute.

Question 13

To avoid the problem of double marginalization

Accepted Answer

A) transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division. 
B) firms should put more emphasis on vertical integration. 
C) firms should engage in two-part pricing. 
D) firms should engage in commodity bundling, unless it is possible to engage in either first or second degree price discrimination. 
A) transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division. 
B) firms should put more emphasis on vertical integration. 
C) firms should engage in two-part pricing. 
D) firms should engage in commodity bundling, unless it is possible to engage in either first or second degree price discrimination.

Question 14

A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs.It faces an inverse demand function given by P = 50 - Q.Suppose fixed costs rise to $400.What happens in the market?

Accepted Answer

A) The firm will raise the price. 
B) The firm will shut down immediately. 
C) The firm continues to produce the same output and charge the same price. 
D) The firm will reduce its output and raise price. 
A) The firm will raise the price. 
B) The firm will shut down immediately. 
C) The firm continues to produce the same output and charge the same price. 
D) The firm will reduce its output and raise price.

Question 15

Which of the following pricing strategies is not used in markets with special cost and demand structures?

Accepted Answer

A) Peak-load pricing. 
B) Cross-subsidization. 
C) Transfer pricing. 
D) Low-price guarantees. 
A) Peak-load pricing. 
B) Cross-subsidization. 
C) Transfer pricing. 
D) Low-price guarantees.

Question 16

The average consumer at a firm with market power has an inverse demand function of P = 10 - Q.The firm's cost function is C = 2Q.If the firm engages in two-part pricing, what is the optimal price to charge a consumer for each unit purchased?

Accepted Answer

A) $0. 
B) $1. 
C) $4. 
D) none of the statements associated with this question are correct. 
A) $0. 
B) $1. 
C) $4. 
D) none of the statements associated with this question are correct.

Question 17

Suppose you are an analyst for the Coca-Cola Company.An individuals' inverse demand for Coca-Cola is estimated to be P = 98 - 4Q (in cents).If Coca-Cola is produced according to the following cost function C(Q) = 1,000 + 2Q (in cents), compute the surplus consumer receive when Coca-Cola charges the optimal block price.

Accepted Answer

A) $0. 
B) $11.52. 
C) $1152. 
D) $576. 
A) $0. 
B) $11.52. 
C) $1152. 
D) $576.

Question 18

The price elasticity of demand for senior citizens purchasing coffee from McDonald's is -5 while non senior citizens have a price elasticity of demand equal to -1.25.If is cost McDonald's $0.02 to produce a coffee, the optimal price for a cup of coffee for non senior citizens and resultant marginal cost under third-degree price discrimination are

Accepted Answer

A) $0.004 and $0.02. 
B) $0.02 and $0.80. 
C) $0.10 and $0.02. 
D) $10 and $0.20. 
A) $0.004 and $0.02. 
B) $0.02 and $0.80. 
C) $0.10 and $0.02. 
D) $10 and $0.20.

Question 19

Suppose two types of consumers buy suits.Consumers of type A will pay $100 for a coat, and $50 for pants.Consumers of type B will pay $75 for a coat, and $75 for pants.The firm selling suits faces no competition and has a marginal cost of zero.If the firm can identify each consumer type and can price discriminate, what is the optimal price for a pair of pants?

Accepted Answer

A) Charge both types $150. 
B) Charge both types $75. 
C) Charge type A consumers $50, and type B consumers $75. 
D) Charge type A consumers $50, and type B consumers $50. 
A) Charge both types $150. 
B) Charge both types $75. 
C) Charge type A consumers $50, and type B consumers $75. 
D) Charge type A consumers $50, and type B consumers $50.

Question 20

Suppose a typical consumer's inverse demand function for bottled water at a resort area where one firm owns all the rights to a local spring is given by

Accepted Answer

@#IMG-DLM& .The marginal cost for gathering and bo

Which group of policies aims at extracting all consumer surplus?

Cinemas sometimes give senior citizens discounts.What is the possible privately motivated purpose for them to do so?

What are the profits of the monopoly in equilibrium?

Many restaurants have found that it is advantageous to offer free appetizers with a two-drink minimum during a limited number of hours.Is this profit-maximizing behavior? Why or why not?

What price should a firm charge for a package of two shirts given a marginal cost of $2 and an inverse demand function P = 6 - 2Q by the representative consumer?

Which of the following strategies will most likely not enhance profits in a Bertrand oligopoly?

Which of the following is a true statement about the process of cross-subsidization, given a firm is selling two products?

Which of the following pricing strategies does not usually enhance the profits of firms with market power?

You run a golf course at a tourist resort.At your resort, there are two distinct groups of players.One group owns property at the resort and resides there most of the year.On average, each of these consumers has a monthly inverse demand for golf services of

To avoid the problem of double marginalization

A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs.It faces an inverse demand function given by P = 50 - Q.Suppose fixed costs rise to $400.What happens in the market?

Which of the following pricing strategies is not used in markets with special cost and demand structures?

The average consumer at a firm with market power has an inverse demand function of P = 10 - Q.The firm's cost function is C = 2Q.If the firm engages in two-part pricing, what is the optimal price to charge a consumer for each unit purchased?

Suppose a typical consumer's inverse demand function for bottled water at a resort area where one firm owns all the rights to a local spring is given by

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 11: Pricing Strategies for Firms With Market Power

Which group of policies aims at extracting all consumer surplus?

Cinemas sometimes give senior citizens discounts.What is the possible privately motivated purpose for them to do so?

What are the profits of the monopoly in equilibrium?

Many restaurants have found that it is advantageous to offer free appetizers with a two-drink minimum during a limited number of hours.Is this profit-maximizing behavior? Why or why not?

What price should a firm charge for a package of two shirts given a marginal cost of $2 and an inverse demand function P = 6 - 2Q by the representative consumer?

Which of the following strategies will most likely not enhance profits in a Bertrand oligopoly?

Which of the following is a true statement about the process of cross-subsidization, given a firm is selling two products?

Which of the following pricing strategies does not usually enhance the profits of firms with market power?

You run a golf course at a tourist resort.At your resort, there are two distinct groups of players.One group owns property at the resort and resides there most of the year.On average, each of these consumers has a monthly inverse demand for golf services of

To avoid the problem of double marginalization

A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs.It faces an inverse demand function given by P = 50 - Q.Suppose fixed costs rise to $400.What happens in the market?

Which of the following pricing strategies is not used in markets with special cost and demand structures?

The average consumer at a firm with market power has an inverse demand function of P = 10 - Q.The firm's cost function is C = 2Q.If the firm engages in two-part pricing, what is the optimal price to charge a consumer for each unit purchased?

Suppose a typical consumer's inverse demand function for bottled water at a resort area where one firm owns all the rights to a local spring is given by

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters