Question 1

A producer might practice price discrimination

Accepted Answer

A) to make its products more affordable to those with low incomes 
B) to maximise economic efficiency 
C) to maximise profits 
D) to maximise quantity demanded 
A) to make its products more affordable to those with low incomes 
B) to maximise economic efficiency 
C) to maximise profits 
D) to maximise quantity demanded

Question 2

Figure 9.12   Figure 9.12 shows the cost and demand curves for the ETSA.
-Refer to Figure 9.12.ETSA Power is a natural monopoly because

Accepted Answer

A) it is a power company and all power companies are natural monopolies. 
B) average total cost is still declining when it intersects demand. 
C) of its continually declining marginal revenue curve as output rises. 
D) its marginal cost lies entirely below its long-run average cost. 
A) it is a power company and all power companies are natural monopolies. 
B) average total cost is still declining when it intersects demand. 
C) of its continually declining marginal revenue curve as output rises. 
D) its marginal cost lies entirely below its long-run average cost.

Question 3

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1200.Assume that Iris and Daphne do not know each other.If the price is $800 per copy,

Accepted Answer

A) both Iris and Daphne will purchase Joss's services, and Joss will undertake the job. 
B) only Daphne will purchase Joss's services, and Joss will undertake the job for her. 
C) only Daphne will want to purchase Joss's services, but Joss will not be willing to do the work. 
D) neither Iris nor Daphne will commission the work. 
A) both Iris and Daphne will purchase Joss's services, and Joss will undertake the job. 
B) only Daphne will purchase Joss's services, and Joss will undertake the job for her. 
C) only Daphne will want to purchase Joss's services, but Joss will not be willing to do the work. 
D) neither Iris nor Daphne will commission the work.

Question 4

Ordinarily, governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Accepted Answer

A) Patents encourage firms to spend money on research necessary to create new products. 
B) Politicians sometimes succumb to pressure from lobbyists to grant favours to businesses for political reasons. 
C) Patents are an important source of government revenue. 
D) Patents are justified because they are an important means for creating network externalities. 
A) Patents encourage firms to spend money on research necessary to create new products. 
B) Politicians sometimes succumb to pressure from lobbyists to grant favours to businesses for political reasons. 
C) Patents are an important source of government revenue. 
D) Patents are justified because they are an important means for creating network externalities.

Question 5

How does a monopoly differ from monopolistic competition?

Accepted Answer

A) A monopoly has market power while a firm in monopolistic competition does not have any market power. 
B) A monopoly can never incur a loss, but a firm in monopolistic competition can. 
C) In a monopoly there are significant entry barriers, but there are low barriers to entry in a monopolistically competitive market structure. 
D) A monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve. 
A) A monopoly has market power while a firm in monopolistic competition does not have any market power. 
B) A monopoly can never incur a loss, but a firm in monopolistic competition can. 
C) In a monopoly there are significant entry barriers, but there are low barriers to entry in a monopolistically competitive market structure. 
D) A monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve.

Question 6

Figure 9.10  
-Refer to Figure 9.10.Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the

Accepted Answer

A) area FHE. 
B) area FGE. 
C) area P1P2EF. 
D) area P1P2GF. 
A) area FHE. 
B) area FGE. 
C) area P1P2EF. 
D) area P1P2GF.

Question 7

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1200.Assume that Iris and Daphne do not know each other.Which of the following statements is true?

Accepted Answer

A) Joss should charge each customer $600; that way he will earn his opportunity cost and it will be fair to both Iris and Daphne. 
B) Joss should charge Iris $500 and Daphne no more than $700; that way he earns his opportunity cost and there is no loss in economic surplus. 
C) Joss should charge Iris $500 and Daphne $800; that way economic surplus is maximised. 
D) Joss should charge Iris $500, but charging Daphne $800 is unfair because it allows Joss to earn more than his opportunity cost. 
A) Joss should charge each customer $600; that way he will earn his opportunity cost and it will be fair to both Iris and Daphne. 
B) Joss should charge Iris $500 and Daphne no more than $700; that way he earns his opportunity cost and there is no loss in economic surplus. 
C) Joss should charge Iris $500 and Daphne $800; that way economic surplus is maximised. 
D) Joss should charge Iris $500, but charging Daphne $800 is unfair because it allows Joss to earn more than his opportunity cost.

Question 8

Figure 9.9   Figure 9.9 shows the demand and cost curves for a monopolist.
-Refer to Figure 9.9.The economically efficient output level is

Accepted Answer

A) 600 units 
B) 800 units 
C) 940 units 
D) 1160 units 
A) 600 units 
B) 800 units 
C) 940 units 
D) 1160 units

Question 9

If Mort's House of Flowers sells one dozen roses to different customers at different prices, economists would consider this an example of

Accepted Answer

A) price gouging. 
B) rational ignorance. 
C) arbitrage. 
D) price discrimination. 
A) price gouging. 
B) rational ignorance. 
C) arbitrage. 
D) price discrimination.

Question 10

a.What is the difference between a horizontal merger and a vertical merger?
b.Give an example of each type of merger.
c.Could a horizontal merger be welfare improving?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.A horizontal merger is a merger betwee

Question 11

Which of the following undermines a firm's ability to engage in price discrimination?

Accepted Answer

A) The seller's market power 
B) The inability to prevent resale of the product from one market segment to another 
C) Buyers having different elasticities of demand for the product 
D) The seller's ability to segment the total market 
A) The seller's market power 
B) The inability to prevent resale of the product from one market segment to another 
C) Buyers having different elasticities of demand for the product 
D) The seller's ability to segment the total market

Question 12

Relative to a perfectly competitive market, a monopoly results in

Accepted Answer

A) a gain in producer surplus equal to the gain in consumer surplus. 
B) a gain in producer surplus equal to the loss in consumer surplus. 
C) a gain in producer surplus less than the loss in consumer surplus. 
D) greater economic efficiency. 
A) a gain in producer surplus equal to the gain in consumer surplus. 
B) a gain in producer surplus equal to the loss in consumer surplus. 
C) a gain in producer surplus less than the loss in consumer surplus. 
D) greater economic efficiency.

Question 13

Because a monopoly's demand curve is the same as the market demand curve for its product

Accepted Answer

A) the monopoly's marginal revenue equals its price. 
B) the monopoly is a price taker. 
C) the monopoly must lower its price to sell more of its product. 
D) the monopoly's average total cost always falls as it increases its output. 
A) the monopoly's marginal revenue equals its price. 
B) the monopoly is a price taker. 
C) the monopoly must lower its price to sell more of its product. 
D) the monopoly's average total cost always falls as it increases its output.

Question 14

Which of the following does not arise from price discrimination?

Accepted Answer

A) An increase in producer surplus 
B) An increase in consumer surplus 
C) An increase in quantity sold 
D) An increase in profits 
A) An increase in producer surplus 
B) An increase in consumer surplus 
C) An increase in quantity sold 
D) An increase in profits

Question 15

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the incremental profit from the last unit sold is $7.

Accepted Answer

A) True 
 B)False

Question 16

A successful strategy of price discrimination requires that a firm be a price-taker.

Accepted Answer

A) True 
 B)False

Question 17

Figure 9.6   Figure 9.6 shows the cost and demand curves for a monopolist.
-Refer to Figure 9.6.What are the profit-maximising output and price for the monopolist?

Accepted Answer

A) output = 62; price = $24. 
B) output = 62; price = $18. 
C) output = 83; price = $22. 
D) output = 104; price = $20.80. 
A) output = 62; price = $24. 
B) output = 62; price = $18. 
C) output = 83; price = $22. 
D) output = 104; price = $20.80.

Question 18

Suppose a monopoly is producing its profit-maximising output level.Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output.As a result, the monopolist will increase the price of its product to cover its higher cost.

Accepted Answer

A) True 
 B)False

Question 19

If a monopolist engages in first-degree price discrimination, it will produce the same output level as a perfectly competitive industry.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) A firm must have market power. 
B) The firm must be able to prevent consumers who buy a product at a low price from reselling it to other consumers at a high price. 
C) Managers must practice yield management. 
D) Some consumers must have 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. 
A) A firm must have market power. 
B) The firm must be able to prevent consumers who buy a product at a low price from reselling it to other consumers at a high price. 
C) Managers must practice yield management. 
D) Some consumers must have 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.

A producer might practice price discrimination

Figure 9.12 Figure 9.12 shows the cost and demand curves for the ETSA. -Refer to Figure 9.12.ETSA Power is a natural monopoly because

Ordinarily, governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

How does a monopoly differ from monopolistic competition?

Figure 9.10 -Refer to Figure 9.10.Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the

Figure 9.9 Figure 9.9 shows the demand and cost curves for a monopolist. -Refer to Figure 9.9.The economically efficient output level is

If Mort's House of Flowers sells one dozen roses to different customers at different prices, economists would consider this an example of

Which of the following undermines a firm's ability to engage in price discrimination?

Relative to a perfectly competitive market, a monopoly results in

Because a monopoly's demand curve is the same as the market demand curve for its product

Which of the following does not arise from price discrimination?

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the incremental profit from the last unit sold is $7.

A successful strategy of price discrimination requires that a firm be a price-taker.

Figure 9.6 Figure 9.6 shows the cost and demand curves for a monopolist. -Refer to Figure 9.6.What are the profit-maximising output and price for the monopolist?

Suppose a monopoly is producing its profit-maximising output level.Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output.As a result, the monopolist will increase the price of its product to cover its higher cost.

If a monopolist engages in first-degree price discrimination, it will produce the same output level as a perfectly competitive industry.

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

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

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Exam 9: Monopoly Markets

A producer might practice price discrimination

Figure 9.12 Figure 9.12 shows the cost and demand curves for the ETSA. -Refer to Figure 9.12.ETSA Power is a natural monopoly because

Ordinarily, governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

How does a monopoly differ from monopolistic competition?

Figure 9.10 -Refer to Figure 9.10.Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the

Figure 9.9 Figure 9.9 shows the demand and cost curves for a monopolist. -Refer to Figure 9.9.The economically efficient output level is

If Mort's House of Flowers sells one dozen roses to different customers at different prices, economists would consider this an example of

Which of the following undermines a firm's ability to engage in price discrimination?

Relative to a perfectly competitive market, a monopoly results in

Because a monopoly's demand curve is the same as the market demand curve for its product

Which of the following does not arise from price discrimination?

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the incremental profit from the last unit sold is $7.

A successful strategy of price discrimination requires that a firm be a price-taker.

Figure 9.6 Figure 9.6 shows the cost and demand curves for a monopolist. -Refer to Figure 9.6.What are the profit-maximising output and price for the monopolist?

Suppose a monopoly is producing its profit-maximising output level.Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output.As a result, the monopolist will increase the price of its product to cover its higher cost.

If a monopolist engages in first-degree price discrimination, it will produce the same output level as a perfectly competitive industry.

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

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

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