Question 1

Which of the following is not an example of price discrimination?

Accepted Answer

A)  Adobe Systems offers software at discounted prices to students and faculty at K-12 and university levels. 
B)  Unlike foreign tourists, citizens of Cambodia are exempted from paying an admission fee to the temples of Angkor. 
C)  Senior citizens may purchase special fare tickets for public transportation that are not available to others. 
D)  Buyers at an automotive parts store receive a discount for bulk buying because the store is able to pass on to its customers some of the lower average cost for producing large quantities. 
A)  Adobe Systems offers software at discounted prices to students and faculty at K-12 and university levels. 
B)  Unlike foreign tourists, citizens of Cambodia are exempted from paying an admission fee to the temples of Angkor. 
C)  Senior citizens may purchase special fare tickets for public transportation that are not available to others. 
D)  Buyers at an automotive parts store receive a discount for bulk buying because the store is able to pass on to its customers some of the lower average cost for producing large quantities. D

Question 2

To maximise profit,a monopolist will produce and sell a quantity such that for the last unit sold,marginal revenue equals marginal cost,and will charge a price given by the demand curve at that output level.

Accepted Answer

A) True 
 B)False  True

Question 3

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  False

Question 4

In which market structure is it not possible to practice price discrimination?

Accepted Answer

A)  Perfect competition 
B)  Monopolistic competition 
C)  Oligopoly 
D)  Monopoly 
A)  Perfect competition 
B)  Monopolistic competition 
C)  Oligopoly 
D)  Monopoly

Question 5

Figure 8-9   Figure 8-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 8-9.What is the economically efficient output level?

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 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

With perfect price discrimination there is

Accepted Answer

A)  no deadweight loss. 
B)  no producer surplus. 
C)  one single price. 
D)  an increase in consumer surplus. 
A)  no deadweight loss. 
B)  no producer surplus. 
C)  one single price. 
D)  an increase in consumer surplus.

Question 8

If a restaurant was a natural monopoly,dividing the restaurant equally into two separate restaurants would

Accepted Answer

A)  decrease marginal cost. 
B)  raise average total cost. 
C)  increase total revenue. 
D)  make marginal revenue less elastic. 
A)  decrease marginal cost. 
B)  raise average total cost. 
C)  increase total revenue. 
D)  make marginal revenue less elastic.

Question 9

Table 8-1
   A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 8-1.
-Refer to Table 8-1.What is the firm's profit-maximising output and what is the price charged to sell this output?

Accepted Answer

A)  P = $85; Q = 10 
B)  P = $80; Q = 11 
C)  P = $70; Q = 13 
D)  P = $65; Q = 14 
A)  P = $85; Q = 10 
B)  P = $80; Q = 11 
C)  P = $70; Q = 13 
D)  P = $65; Q = 14

Question 10

Wendell can sell five motor homes per week at a price of $22 000.If he lowers the price of motor homes to $20 000 per week he will sell six motor homes.What is the marginal revenue of the sixth motor home?

Accepted Answer

A)  $10 000 
B)  $12 000 
C)  $20 000 
D)  $22 000 
A)  $10 000 
B)  $12 000 
C)  $20 000 
D)  $22 000

Question 11

A monopolist's profit-maximising price and output correspond to the point on a graph

Accepted Answer

A)  where average total cost is minimised. 
B)  where total costs are the smallest relative to price. 
C)  where marginal revenue equals marginal cost. 
D)  where price is as high as possible. 
A)  where average total cost is minimised. 
B)  where total costs are the smallest relative to price. 
C)  where marginal revenue equals marginal cost. 
D)  where price is as high as possible.

Question 12

Figure 8-11   Figure 8-11 shows the cost and demand curves for a monopolist.
-Refer to Figure 8-11.Assume the firm maximises its profits.What is the amount of consumer surplus?

Accepted Answer

A)  $21 
B)  $124 
C)  $186 
D)  $332 
A)  $21 
B)  $124 
C)  $186 
D)  $332

Question 13

The airline industry routinely engages in price discrimination across time.

Accepted Answer

A) True 
 B)False

Question 14

In discussions of barriers to entry,what is meant by the term 'virtuous cycle'?

Accepted Answer

A)  A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. 
B)  A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market. 
C)  A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the 'invisible hand'). 
D)  A virtuous cycle refers to a situation where if a firm can attract enough customers initially, it can attract additional customers because its product's value has been increased by other customers using it, which attracts even more customers. 
A)  A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. 
B)  A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market. 
C)  A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the 'invisible hand'). 
D)  A virtuous cycle refers to a situation where if a firm can attract enough customers initially, it can attract additional customers because its product's value has been increased by other customers using it, which attracts even more customers.

Question 15

Figure 8-4   Figure 8-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 8-4.What is the price charged for the profit-maximising output level?

Accepted Answer

A)  $13 
B)  $21 
C)  $27 
D)  $34 
A)  $13 
B)  $21 
C)  $27 
D)  $34

Question 16

Price discrimination is the practice of

Accepted Answer

A)  charging different prices for the same good when the price differences are not due to differences in cost. 
B)  charging different prices for the same good when the price differences arise because of differences in cost. 
C)  charging different prices for different qualities of a product. 
D)  charging higher prices for brand-named goods and lower prices for generic versions of the goods. 
A)  charging different prices for the same good when the price differences are not due to differences in cost. 
B)  charging different prices for the same good when the price differences arise because of differences in cost. 
C)  charging different prices for different qualities of a product. 
D)  charging higher prices for brand-named goods and lower prices for generic versions of the goods.

Question 17

A monopoly is characterised by all of the following except

Accepted Answer

A)  there are only a few sellers each selling a unique product. 
B)  entry barriers are high. 
C)  there are no close substitutes to the firm's product. 
D)  the firm has market power. 
A)  there are only a few sellers each selling a unique product. 
B)  entry barriers are high. 
C)  there are no close substitutes to the firm's product. 
D)  the firm has market power.

Question 18

When a proposed merger between two companies is reviewed by the government,the relevant market is defined by

Accepted Answer

A)  whether or not there are close substitutes for the products of the two firms. 
B)  how elastic the demand is for each firm's product. 
C)  counting the number of firms that produce the same product. 
D)  how much advertising is done in the industry. 
A)  whether or not there are close substitutes for the products of the two firms. 
B)  how elastic the demand is for each firm's product. 
C)  counting the number of firms that produce the same product. 
D)  how much advertising is done in the industry.

Question 19

Figure 8-12   Figure 8-12 shows the cost and demand curves for ETSA Power.
-Refer to Figure 8-12.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 20

If a theatre company expects $250 000 in ticket revenue from five performances and $288 000 in ticket revenue if it adds a sixth performance,the

Accepted Answer

A)  marginal revenue of the sixth performance is $48 000. 
B)  marginal revenue of the sixth performance is $38 000. 
C)  cost of staging the sixth performance is probably higher than the cost of staging the previous five. 
D)  company will be making a loss on the sixth performance because its ticket sales will be less than the average received from the previous five. 
A)  marginal revenue of the sixth performance is $48 000. 
B)  marginal revenue of the sixth performance is $38 000. 
C)  cost of staging the sixth performance is probably higher than the cost of staging the previous five. 
D)  company will be making a loss on the sixth performance because its ticket sales will be less than the average received from the previous five.

Which of the following is not an example of price discrimination?

To maximise profit,a monopolist will produce and sell a quantity such that for the last unit sold,marginal revenue equals marginal cost,and will charge a price given by the demand curve at that output level.

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.

In which market structure is it not possible to practice price discrimination?

Figure 8-9 Figure 8-9 shows the demand and cost curves for a monopolist. -Refer to Figure 8-9.What is the economically efficient output level?

With perfect price discrimination,the marginal revenue curve

With perfect price discrimination there is

If a restaurant was a natural monopoly,dividing the restaurant equally into two separate restaurants would

Table 8-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 8-1. -Refer to Table 8-1.What is the firm's profit-maximising output and what is the price charged to sell this output?

Wendell can sell five motor homes per week at a price of $22 000.If he lowers the price of motor homes to $20 000 per week he will sell six motor homes.What is the marginal revenue of the sixth motor home?

A monopolist's profit-maximising price and output correspond to the point on a graph

Figure 8-11 Figure 8-11 shows the cost and demand curves for a monopolist. -Refer to Figure 8-11.Assume the firm maximises its profits.What is the amount of consumer surplus?

The airline industry routinely engages in price discrimination across time.

In discussions of barriers to entry,what is meant by the term 'virtuous cycle'?

Figure 8-4 Figure 8-4 shows the demand and cost curves for a monopolist. -Refer to Figure 8-4.What is the price charged for the profit-maximising output level?

Price discrimination is the practice of

A monopoly is characterised by all of the following except

When a proposed merger between two companies is reviewed by the government,the relevant market is defined by

Figure 8-12 Figure 8-12 shows the cost and demand curves for ETSA Power. -Refer to Figure 8-12.ETSA Power is a natural monopoly because

If a theatre company expects $250 000 in ticket revenue from five performances and $288 000 in ticket revenue if it adds a sixth performance,the

Economics: Foundations and Models

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Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

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Unemployment and Inflation

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Exam 8: Technology, production, and Costs

Which of the following is not an example of price discrimination?

To maximise profit,a monopolist will produce and sell a quantity such that for the last unit sold,marginal revenue equals marginal cost,and will charge a price given by the demand curve at that output level.

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.

In which market structure is it not possible to practice price discrimination?

Figure 8-9 Figure 8-9 shows the demand and cost curves for a monopolist. -Refer to Figure 8-9.What is the economically efficient output level?

With perfect price discrimination,the marginal revenue curve

With perfect price discrimination there is

If a restaurant was a natural monopoly,dividing the restaurant equally into two separate restaurants would

Table 8-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 8-1. -Refer to Table 8-1.What is the firm's profit-maximising output and what is the price charged to sell this output?

Wendell can sell five motor homes per week at a price of $22 000.If he lowers the price of motor homes to $20 000 per week he will sell six motor homes.What is the marginal revenue of the sixth motor home?

A monopolist's profit-maximising price and output correspond to the point on a graph

Figure 8-11 Figure 8-11 shows the cost and demand curves for a monopolist. -Refer to Figure 8-11.Assume the firm maximises its profits.What is the amount of consumer surplus?

The airline industry routinely engages in price discrimination across time.

In discussions of barriers to entry,what is meant by the term 'virtuous cycle'?

Figure 8-4 Figure 8-4 shows the demand and cost curves for a monopolist. -Refer to Figure 8-4.What is the price charged for the profit-maximising output level?

Price discrimination is the practice of

A monopoly is characterised by all of the following except

When a proposed merger between two companies is reviewed by the government,the relevant market is defined by

Figure 8-12 Figure 8-12 shows the cost and demand curves for ETSA Power. -Refer to Figure 8-12.ETSA Power is a natural monopoly because

If a theatre company expects $250 000 in ticket revenue from five performances and $288 000 in ticket revenue if it adds a sixth performance,the

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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