Question 1

Which of the following products allows the seller to identify different groups of consumers (segment the market) and practice price discrimination?

Accepted Answer

A)  clothing items sold through Macy's Department Store 
B)  a hamburger sold at Burger King 
C)  a cafe latte sold at Starbucks 
D)  tickets to matinee shows at a movie theatre 
A)  clothing items sold through Macy's Department Store 
B)  a hamburger sold at Burger King 
C)  a cafe latte sold at Starbucks 
D)  tickets to matinee shows at a movie theatre

Question 2

Network externalities

Accepted Answer

A)  can only exist when there are economies of scale. 
B)  prevent the dominance of a market by one firm. 
C)  exist when the usefulness of a product increases with the number of consumers who use it. 
D)  are created when celebrity endorsements of products lead to a surge in the demand for those products. 
A)  can only exist when there are economies of scale. 
B)  prevent the dominance of a market by one firm. 
C)  exist when the usefulness of a product increases with the number of consumers who use it. 
D)  are created when celebrity endorsements of products lead to a surge in the demand for those products.

Question 3

Most movie theatres charge different prices to different groups of customers for movie admission but not for movie popcorn. Which of the following is a reason for this?

Accepted Answer

A)  because the markup on movie popcorn is very high and movie theatres do not want to forego this source of revenue 
B)  because the demand for popcorn is very high relative to the demand for movie admissions 
C)  because it is easier to limit resale in movie admissions but not in popcorn 
D)  because the cost of operating a concession stand in a movie theatre is very high compared to the cost of showing a movie 
A)  because the markup on movie popcorn is very high and movie theatres do not want to forego this source of revenue 
B)  because the demand for popcorn is very high relative to the demand for movie admissions 
C)  because it is easier to limit resale in movie admissions but not in popcorn 
D)  because the cost of operating a concession stand in a movie theatre is very high compared to the cost of showing a movie

Question 4

Which of the following statements is true?

Accepted Answer

A)  If a tax is imposed on a product sold by a monopolist, the monopolist will maximise its profits by producing where marginal revenue equals marginal cost. 
B)  A monopolist will always charge the highest possible price. 
C)  If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers. 
D)  Because a monopolist faces no competition, the demand for its product is perfectly inelastic. 
A)  If a tax is imposed on a product sold by a monopolist, the monopolist will maximise its profits by producing where marginal revenue equals marginal cost. 
B)  A monopolist will always charge the highest possible price. 
C)  If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers. 
D)  Because a monopolist faces no competition, the demand for its product is perfectly inelastic.

Question 5

-Refer to Figure 9-4. What is the amount of the monopoly's total cost of production?

Accepted Answer

A)  $21 600 
B)  $17 700 
C)  $9340 
D)  $7800 
A)  $21 600 
B)  $17 700 
C)  $9340 
D)  $7800

Question 6

With perfect price discrimination, the marginal revenue curve

Accepted Answer

A)  is below the demand curve. 
B)  is above the demand curve. 
C)  is equal to the demand curve. 
D)  is horizontal. 
A)  is below the demand curve. 
B)  is above the demand curve. 
C)  is equal to the demand curve. 
D)  is horizontal.

Question 7

One reason why McDonald's charges a single price for its products is that it is difficult and costly for the company to determine each individual consumer's willingness to pay.

Accepted Answer

A) True 
 B)False

Question 8

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale. The main reason for the elimination of profits is

Accepted Answer

A)  after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat. 
B)  firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses. 
C)  the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls. 
D)  after 20 years patent protection is ended and other firms can produce less expensive generic versions of the drug. 
A)  after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat. 
B)  firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses. 
C)  the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls. 
D)  after 20 years patent protection is ended and other firms can produce less expensive generic versions of the drug.

Question 9

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.

Question 10

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements regarding economic surplus in each market structure is true?

Accepted Answer

A)  Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions. 
B)  Under perfectly competitive conditions, economic surplus in this industry is maximised. Under monopoly conditions, economic surplus is minimised. 
C)  Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price-takers. Under monopoly conditions, economic surplus is equal to producer surplus. 
D)  Under perfectly competitive conditions, economic surplus is maximised. Under monopoly conditions, economic surplus is less than under perfect competition and there is a deadweight loss. 
A)  Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions. 
B)  Under perfectly competitive conditions, economic surplus in this industry is maximised. Under monopoly conditions, economic surplus is minimised. 
C)  Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price-takers. Under monopoly conditions, economic surplus is equal to producer surplus. 
D)  Under perfectly competitive conditions, economic surplus is maximised. Under monopoly conditions, economic surplus is less than under perfect competition and there is a deadweight loss.

Question 11

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.
Which of the characteristics in the list above is shared by an oligopolist and a monopolist?

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 12

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price. This practice is known as

Accepted Answer

A)  first-degree exploitation, or perfect price discrimination. 
B)  maximisation of producer surplus, or perfect price discrimination. 
C)  first-degree price discrimination, or perfect price discrimination. 
D)  first-degree transfer of consumer surplus, or perfect price discrimination. 
A)  first-degree exploitation, or perfect price discrimination. 
B)  maximisation of producer surplus, or perfect price discrimination. 
C)  first-degree price discrimination, or perfect price discrimination. 
D)  first-degree transfer of consumer surplus, or perfect price discrimination.

Question 13

Producers in perfect competition receive a smaller producer surplus than a monopoly producer.

Accepted Answer

A) True 
 B)False

Question 14

The ability of a firm to charge a price greater than marginal cost is called

Accepted Answer

A)  monopoly power. 
B)  price-making power. 
C)  cost-plus pricing. 
D)  market power. 
A)  monopoly power. 
B)  price-making power. 
C)  cost-plus pricing. 
D)  market power.

Question 15

Which of the following is necessary in order for a firm to successfully practice price discrimination?

Accepted Answer

A)  The firm must practice product differentiation. 
B)  The demand for the firm's product is inelastic. 
C)  The firm must be able to segment the market for the product. 
D)  The firm's transactions costs must be zero. 
A)  The firm must practice product differentiation. 
B)  The demand for the firm's product is inelastic. 
C)  The firm must be able to segment the market for the product. 
D)  The firm's transactions costs must be zero.

Question 16

Which of the following is true for a monopolist?

Accepted Answer

A)  Being the only seller in the market, the monopolist faces a perfectly inelastic demand curve. 
B)  Being the only seller in the market, the monopolist faces a perfectly elastic demand curve. 
C)  Being the only seller in the market, the monopolist faces the market demand curve. 
D)  Being the only seller in the market, the monopolist faces a downward-sloping demand curve that lies below the marginal revenue curve. 
A)  Being the only seller in the market, the monopolist faces a perfectly inelastic demand curve. 
B)  Being the only seller in the market, the monopolist faces a perfectly elastic demand curve. 
C)  Being the only seller in the market, the monopolist faces the market demand curve. 
D)  Being the only seller in the market, the monopolist faces a downward-sloping demand curve that lies below the marginal revenue curve.

Question 17

Which of the following statements is consistent with the views of Joseph Schumpeter?

Accepted Answer

A)  Research and development by competitive firms is responsible for most technological changes. 
B)  An economy benefits from firms having market power because these firms are more likely to be able to commit funds for research and development. 
C)  Enforcement of antitrust laws is necessary to promote competition among firms. 
D)  A lack of competition discourages firms from developing new technologies. 
A)  Research and development by competitive firms is responsible for most technological changes. 
B)  An economy benefits from firms having market power because these firms are more likely to be able to commit funds for research and development. 
C)  Enforcement of antitrust laws is necessary to promote competition among firms. 
D)  A lack of competition discourages firms from developing new technologies.

Question 18

If a monopolist's price is $50 per unit and its marginal cost is $25, then

Accepted Answer

A)  to maximise profit the firm should increase output. 
B)  to maximise profit the firm should decrease output. 
C)  to maximise profit the firm should continue to produce the output it is producing. 
D)  Not enough information is given to say what the firm should do to maximise profit. 
A)  to maximise profit the firm should increase output. 
B)  to maximise profit the firm should decrease output. 
C)  to maximise profit the firm should continue to produce the output it is producing. 
D)  Not enough information is given to say what the firm should do to maximise profit.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

In evaluating the degree of economic efficiency in a market, we can state that the size of the deadweight loss in a market will be smaller

Accepted Answer

A)  the greater the difference between marginal cost and price. 
B)  the smaller the difference between marginal cost and average total cost. 
C)  the smaller the difference between marginal cost and price. 
D)  the greater the difference between marginal cost and average revenue. 
A)  the greater the difference between marginal cost and price. 
B)  the smaller the difference between marginal cost and average total cost. 
C)  the smaller the difference between marginal cost and price. 
D)  the greater the difference between marginal cost and average revenue.

Which of the following products allows the seller to identify different groups of consumers (segment the market) and practice price discrimination?

Network externalities

Most movie theatres charge different prices to different groups of customers for movie admission but not for movie popcorn. Which of the following is a reason for this?

Which of the following statements is true?

-Refer to Figure 9-4. What is the amount of the monopoly's total cost of production?

With perfect price discrimination, the marginal revenue curve

One reason why McDonald's charges a single price for its products is that it is difficult and costly for the company to determine each individual consumer's willingness to pay.

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale. The main reason for the elimination of profits is

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

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements regarding economic surplus in each market structure is true?

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price. This practice is known as

Producers in perfect competition receive a smaller producer surplus than a monopoly producer.

The ability of a firm to charge a price greater than marginal cost is called

Which of the following is necessary in order for a firm to successfully practice price discrimination?

Which of the following is true for a monopolist?

Which of the following statements is consistent with the views of Joseph Schumpeter?

If a monopolist's price is $50 per unit and its marginal cost is $25, then

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

In evaluating the degree of economic efficiency in a market, we can state that the size of the deadweight loss in a market will be smaller

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

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

Which of the following products allows the seller to identify different groups of consumers (segment the market) and practice price discrimination?

Network externalities

Most movie theatres charge different prices to different groups of customers for movie admission but not for movie popcorn. Which of the following is a reason for this?

Which of the following statements is true?

-Refer to Figure 9-4. What is the amount of the monopoly's total cost of production?

With perfect price discrimination, the marginal revenue curve

One reason why McDonald's charges a single price for its products is that it is difficult and costly for the company to determine each individual consumer's willingness to pay.

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale. The main reason for the elimination of profits is

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

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements regarding economic surplus in each market structure is true?

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price. This practice is known as

Producers in perfect competition receive a smaller producer surplus than a monopoly producer.

The ability of a firm to charge a price greater than marginal cost is called

Which of the following is necessary in order for a firm to successfully practice price discrimination?

Which of the following is true for a monopolist?

Which of the following statements is consistent with the views of Joseph Schumpeter?

If a monopolist's price is $50 per unit and its marginal cost is $25, then

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

In evaluating the degree of economic efficiency in a market, we can state that the size of the deadweight loss in a market will be smaller

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters