Question 1

One reason why airlines charge business travellers and leisure travellers different prices is

Accepted Answer

A) business travellers fly according to schedules that are planned months in advance.Many leisure travellers buy their tickets at the last minute. 
B) business travellers usually travel alone.Leisure travellers often fly with friends and family members; therefore, they have a more inelastic demand for airline tickets than business travellers. 
C) business travellers fly more often than most leisure travellers.As a result, their employers are able to bargain with airlines for lower fares than leisure travellers pay. 
D) business travellers often have inflexible schedules and have to travel on a particular day.The opposite is true for leisure travellers. 
A) business travellers fly according to schedules that are planned months in advance.Many leisure travellers buy their tickets at the last minute. 
B) business travellers usually travel alone.Leisure travellers often fly with friends and family members; therefore, they have a more inelastic demand for airline tickets than business travellers. 
C) business travellers fly more often than most leisure travellers.As a result, their employers are able to bargain with airlines for lower fares than leisure travellers pay. 
D) business travellers often have inflexible schedules and have to travel on a particular day.The opposite is true for leisure travellers.

Question 2

To what does market power refer?

Accepted Answer

A) The ability of consumers to dictate what products should be produced. 
B) The ability of a firm to advertise its product and succeed in selling more output. 
C) The ability of a firm to sell at a lower price than rival sellers. 
D) The ability of a firm to charge a price higher than the marginal cost of production. 
A) The ability of consumers to dictate what products should be produced. 
B) The ability of a firm to advertise its product and succeed in selling more output. 
C) The ability of a firm to sell at a lower price than rival sellers. 
D) The ability of a firm to charge a price higher than the marginal cost of production.

Question 3

What happens to a monopoly's revenue when it sells more units of its product?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The monopolist must lower its price to s

Question 4

For a natural monopoly, the marginal cost of producing an additional unit of its product is relatively small.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a requirement for a successful price discrimination strategy?

Accepted Answer

A) A firm must have the ability to charge a price greater than marginal cost. 
B) Some consumers must have a greater willingness to pay for the product than other consumers, and the firm must be able to know what prices consumers are willing to pay. 
C) The firm must be able to prevent arbitrage. 
D) Transactions costs must be the same for all consumers. 
A) A firm must have the ability to charge a price greater than marginal cost. 
B) Some consumers must have a greater willingness to pay for the product than other consumers, and the firm must be able to know what prices consumers are willing to pay. 
C) The firm must be able to prevent arbitrage. 
D) Transactions costs must be the same for all consumers.

Question 6

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25, then to maximise profit the firm should decrease output.

Accepted Answer

A) True 
 B)False

Question 7

Consider an industry that is made up of nine firms, each with a market share (per cent of sales)as follows: 
a.Firm A: 30%
b.Firm B: 20%
c.Firms C, D and E: 10% each
d.Firms F, G, H and J: 5% each
What is the value of the four-firm concentration ratio and how is the industry categorised?

Accepted Answer

A) 50%; monopolistic competition 
B) 70%; oligopoly 
C) 75%; oligopoly 
D) 80%; strongly oligopolistic 
A) 50%; monopolistic competition 
B) 70%; oligopoly 
C) 75%; oligopoly 
D) 80%; strongly oligopolistic

Question 8

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

Accepted Answer

A) Control of a key resource 
B) Network externalities 
C) Entry blocked by government action 
D) Economies of scale creating a natural monopoly 
A) Control of a key resource 
B) Network externalities 
C) Entry blocked by government action 
D) Economies of scale creating a natural monopoly

Question 9

For a firm that can effectively price discriminate, a lower price will be charged to

Accepted Answer

A) customers who have an elastic demand for the product 
B) customers who have an inelastic demand for the product 
C) buyers that are members of the largest market segment 
D) buyers that are members of the smallest market segment 
A) customers who have an elastic demand for the product 
B) customers who have an inelastic demand for the product 
C) buyers that are members of the largest market segment 
D) buyers that are members of the smallest market segment

Question 10

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

Accepted Answer

A) most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs. 
B) prices remain high without patent protection because of a lack of competition.Firms that are not granted patents cannot compete with firms that are granted patents. 
C) other firms are free to produce chemically identical drugs.Competition reduces the profits that had been earned by the firms that received patents. 
D) firms will find ways to obtain additional patent protection-often by making cosmetic changes in drugs that were patented-so that they can continue charging high prices. 
A) most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs. 
B) prices remain high without patent protection because of a lack of competition.Firms that are not granted patents cannot compete with firms that are granted patents. 
C) other firms are free to produce chemically identical drugs.Competition reduces the profits that had been earned by the firms that received patents. 
D) firms will find ways to obtain additional patent protection-often by making cosmetic changes in drugs that were patented-so that they can continue charging high prices.

Question 11

Book publishers use price discrimination routinely, but the form of price discrimination they use is different from the form used by airlines and other industries.Explain.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Some consumers in some markets are willi

Question 12

A natural monopoly is most likely to occur in which of the following industries?

Accepted Answer

A) The pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years 
B) The diamond mining and marketing industry because one firm can control a key resource 
C) The software industry because of the importance of network externalities 
D) An industry where fixed costs are very large relative to variable costs 
A) The pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years 
B) The diamond mining and marketing industry because one firm can control a key resource 
C) The software industry because of the importance of network externalities 
D) An industry where fixed costs are very large relative to variable costs

Question 13

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

A natural monopoly arises when the produ

Question 14

When a monopolist engages in perfect price discrimination, the quantity produced and sold

Accepted Answer

A) is lower than the quantity produced and sold if it adopted a single price. 
B) is larger than the quantity produced and sold if it adopted a single price. 
C) is the same level as that produced and sold if it adopted a single price. 
D) could be lower, higher or the same as that produced and sold if it adopted a single price. 
A) is lower than the quantity produced and sold if it adopted a single price. 
B) is larger than the quantity produced and sold if it adopted a single price. 
C) is the same level as that produced and sold if it adopted a single price. 
D) could be lower, higher or the same as that produced and sold if it adopted a single price.

Question 15

Firms do not have market power in which of the following market structures?

Accepted Answer

A) Perfect competition only 
B) Perfect competition and monopolistic competition 
C) Oligopoly 
D) Monopoly 
A) Perfect competition only 
B) Perfect competition and monopolistic competition 
C) Oligopoly 
D) Monopoly

Question 16

Consider the following characteristics: 
a.a market structure with barriers to entry
b.demand curves that are easily identified
c.firm cannot make zero profits in the long run
d.firm can reap long run profits.
The characteristics in the list above shared by an oligopolist and a monopolist are

Accepted Answer

A) a, b, c, and d 
B) a, b, and d 
C) a, c, and d 
D) a and d 
A) a, b, c, and d 
B) a, b, and d 
C) a, c, and d 
D) a and d

Question 17

Why is airline yield management an effective method to increase revenue?

Accepted Answer

A) Because airlines have invested heavily in developing computer models that identify optimal pricing strategies in the various market segments 
B) Because airlines have successfully induced customers to reveal their resources and preferences by offering them different versions of the product such as business class and coach plane tickets 
C) Because a ticket is a contract to transport a specific person, and is not transferable 
D) Because airlines have a monopoly in long-distance carriage 
A) Because airlines have invested heavily in developing computer models that identify optimal pricing strategies in the various market segments 
B) Because airlines have successfully induced customers to reveal their resources and preferences by offering them different versions of the product such as business class and coach plane tickets 
C) Because a ticket is a contract to transport a specific person, and is not transferable 
D) Because airlines have a monopoly in long-distance carriage

Question 18

Figure 9.8   Figure 9.8 reflects the cost and revenue structure for a monopoly that has been in business for a very long time.
-Refer to Figure 9.8.Use the figure above to answer the following questions.
a. Identify the curves labelled A and B.Identify the curve which contains both point Y and point Z.Identify the curve which contains both point V and point W.
b.What is the profit-maximising quantity and what price will the monopolist charge?
c.What area represents total revenue at the profit-maximising output level?
d.What area represents total cost at the profit-maximising output level?
e.What area represents profit?
f.What is the profit per unit (average profit)at the profit-maximising output level?
g.If this industry was organised as a perfectly competitive industry, what would be the profit-maximising price and quantity?
h.What area represents the deadweight loss as a result of a monopoly?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.A = Demand curve; B = Marginal revenue

Question 19

Both first-degree price discrimination and optimal two-part tariff pricing maximise economic surplus.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following are necessary condition(s)for successful price discrimination? a.zero transactions cost
b.a perfectly competitive market structure
c.an imperfectly competitive market structure
d.at least two different markets with different price elasticities of demand
e.at least two different markets with different price elasticities of supply

Accepted Answer

A) a, b, and d only 
B) c and d only 
C) a, c, d and, e only 
D) a and c only 
A) a, b, and d only 
B) c and d only 
C) a, c, d and, e only 
D) a and c only

One reason why airlines charge business travellers and leisure travellers different prices is

To what does market power refer?

What happens to a monopoly's revenue when it sells more units of its product? __________________________________________________________________________________________________________________________________________________________________________________________

For a natural monopoly, the marginal cost of producing an additional unit of its product is relatively small.

Which of the following is not a requirement for a successful price discrimination strategy?

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25, then to maximise profit the firm should decrease output.

Consider an industry that is made up of nine firms, each with a market share (per cent of sales)as follows: a.Firm A: 30% b.Firm B: 20% c.Firms C, D and E: 10% each d.Firms F, G, H and J: 5% each What is the value of the four-firm concentration ratio and how is the industry categorised?

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

For a firm that can effectively price discriminate, a lower price will be charged to

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

A natural monopoly is most likely to occur in which of the following industries?

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly? __________________________________________________________________________________________________________________________________________________________________________________________

When a monopolist engages in perfect price discrimination, the quantity produced and sold

Firms do not have market power in which of the following market structures?

Consider the following characteristics: a.a market structure with barriers to entry b.demand curves that are easily identified c.firm cannot make zero profits in the long run d.firm can reap long run profits. The characteristics in the list above shared by an oligopolist and a monopolist are

Why is airline yield management an effective method to increase revenue?

Both first-degree price discrimination and optimal two-part tariff pricing maximise economic surplus.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 9: Monopoly Markets

One reason why airlines charge business travellers and leisure travellers different prices is

To what does market power refer?

What happens to a monopoly's revenue when it sells more units of its product? __________________________________________________________________________________________________________________________________________________________________________________________

For a natural monopoly, the marginal cost of producing an additional unit of its product is relatively small.

Which of the following is not a requirement for a successful price discrimination strategy?

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25, then to maximise profit the firm should decrease output.

Consider an industry that is made up of nine firms, each with a market share (per cent of sales)as follows: a.Firm A: 30% b.Firm B: 20% c.Firms C, D and E: 10% each d.Firms F, G, H and J: 5% each What is the value of the four-firm concentration ratio and how is the industry categorised?

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

For a firm that can effectively price discriminate, a lower price will be charged to

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

A natural monopoly is most likely to occur in which of the following industries?

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly? __________________________________________________________________________________________________________________________________________________________________________________________

When a monopolist engages in perfect price discrimination, the quantity produced and sold

Firms do not have market power in which of the following market structures?

Consider the following characteristics: a.a market structure with barriers to entry b.demand curves that are easily identified c.firm cannot make zero profits in the long run d.firm can reap long run profits. The characteristics in the list above shared by an oligopolist and a monopolist are

Why is airline yield management an effective method to increase revenue?

Both first-degree price discrimination and optimal two-part tariff pricing maximise economic surplus.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters