Question 1

During low-peak times, what price-quantity combination should the firm charge to maximize profit?

Accepted Answer

A) P1 and Q1. 
B) P3 and Q1. 
C) P1 and Q2. 
D) P2 and Q1.

Question 2

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 optimal two-part pricing, it will earn profits of

Accepted Answer

A) $2. 
B) $32. 
C) $64. 
D) none of the statements associated with this question are correct.

Question 3

One of the conditions under which price discrimination is profitable is:

Accepted Answer

A) ability to identify consumer types. 
B) inability to resell the good. 
C) differences in demand elasticities. 
D) all of the statements associated with this question are correct.

Question 4

A local video store estimates their average customer's demand per year is Q = 20 - 4P, and knows the marginal cost of each rental is $1.00.How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal two-part pricing strategy?

Accepted Answer

A) $20. 
B) $32. 
C) $40. 
D) $64.

Question 5

A monopoly producing X at a marginal cost of $10 per unit and charges a price of $20 per unit.Determine the elasticity of demand at the profit-maximizing price of $20.

Accepted Answer

A) -0.5. 
B) -2. 
C) -0.333. 
D) There is insufficient information to determine the monopoly's price elasticity of demand.

Question 6

You are the owner of a mom-and-pop store that buys milk from a supplier at a cost of $1 per gallon.If you estimate the elasticity of demand for milk sold at your store to be -3.5, what are your profit-maximizing markup and price?

Accepted Answer

The answer of You are the owner of a mom-and-pop...

Question 7

If a product is perceived by consumers as homogeneous, which of the following strategies will work to induce brand loyalty?

Accepted Answer

A) Intensive advertising campaign. 
B) Price wars with competitors. 
C) Frequent buyer rebate programs. 
D) None of the statements associated with this question are correct.

Question 8

You are the only pharmacist in a small town; the next closest drugstore is 50 miles away.The population in your town consists of young farmers and older retired families.You have noticed that the young farmers are less sensitive to price changes than the retired population.Specifically, you have found that the working population has an own price elasticity of demand of -2 and the retired farmers have an own price elasticity of -4.How can you use this information to your advantage?

Accepted Answer

The answer of You are the only pharmacist in a...

Question 9

The idea of charging two different groups of consumers two different prices is practiced in:

Accepted Answer

A) two-part pricing. 
B) price matching. 
C) commodity bundling. 
D) none of the statements associated with this question are correct.

Question 10

Which of the following statements is true?

Accepted Answer

A) The more elastic the demand, the higher is the profit-maximizing markup. 
B) The more elastic the demand, the lower is the profit-maximizing markup. 
C) The higher the marginal cost, the lower the profit-maximizing price. 
D) The higher the average cost, the lower the profit-maximizing price.

Question 11

If the profit-maximizing markup factor in a 10-firm Cournot oligopoly is -2, what is the corresponding market elasticity of demand?

Accepted Answer

A) -1.0. 
B) -1.2. 
C) -2.0. 
D) none of the statements associated with this question are correct.

Question 12

Which of the following is a correct statement?

Accepted Answer

A) The lower the marginal cost, the higher the profit-maximizing price. 
B) The lower the average cost, the higher the profit-maximizing price. 
C) The more inelastic the demand, the higher is the profit-maximizing markup. 
D) The more elastic the demand, the higher is the profit-maximizing markup.

Question 13

Price matching strategies may fail to enhance profits when:

Accepted Answer

A) firms cannot prevent customers from deceptive claims. 
B) firms have different marginal costs. 
C) firms cannot prevent customers from deceptive claims or firms have different marginal costs. 
D) none of the statements associated with this question are correct.

Question 14

Which of the following is true regarding the relationship between the elasticity of demand for an individual firm and the elasticity of demand for the market in a Cournot oligopoly with 5 identical firms?

Accepted Answer

A) EF = (df(p) / dP) x (5P / Q). 
B) EF = (df(p) / dP) x (5Q / P). 
C) EM = 5EF. 
D) EF = (1/5)EM.

Question 15

Which of the following statements about a price matching strategy is incorrect?

Accepted Answer

A) It may be applied in situations besides Bertrand oligopoly. 
B) It requires that the firms can monitor their rival's prices. 
C) It reduces the incentive for a rival firm to initiate a price war. 
D) It only guarantees to match prices that are advertised publicly.

Question 16

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 charges $100 for a suit (which includes both pants and a coat), the firm will sell a suit to:

Accepted Answer

A) type A consumers. 
B) type B consumers. 
C) type A consumers and type B consumers. 
D) none of the statements associated with this question are correct.

Question 17

If the profit-maximizing markup factor in a 3-firm Cournot oligopoly is -2, what is the corresponding market elasticity of demand?

Accepted Answer

A) -1/2. 
B) -2/3. 
C) -1.0. 
D) -2.0.

Question 18

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.Which of the following is the marginal revenue function for the firm?

Accepted Answer

A) MR = 60 - 2Q. 
B) MR = 50 - Q. 
C) MR = 100 - Q. 
D) MR = 50 - 2Q.

Question 19

Suppose that the demand for a monopolist's product is estimated to be Qd = 100 - 2P and it's total costs are C(Q) = 10Q.Under first-degree price discrimination the optimal price(s), number of total units exchanged, profit and consumer surplus are

Accepted Answer

A) P = $30; Q = 40, $\varPi$ = $800; CS = $400. 
B) 10 $\le$ P  $\le$  100; Q = 80; $\varPi$ = $1600; CS = $1600. 
C) 10  $\le$ P  $\le$ 50; Q = 80, $\varPi$ = $1600; CS = $0. 
D) P = $30; Q = 40, $\varPi$0 = $600; CS = $0.

Question 20

A necessary cost-side condition for a firm to implement a cross subsidization pricing strategy is:

Accepted Answer

A) economies of scale. 
B) economies of scope. 
C) constant marginal cost. 
D) limited capacity.

Exam 11: Pricing Strategies for Firms With Market Power

During low-peak times, what price-quantity combination should the firm charge to maximize profit?

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 optimal two-part pricing, it will earn profits of

One of the conditions under which price discrimination is profitable is:

A local video store estimates their average customer's demand per year is Q = 20 - 4P, and knows the marginal cost of each rental is $1.00.How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal two-part pricing strategy?

A monopoly producing X at a marginal cost of $10 per unit and charges a price of $20 per unit.Determine the elasticity of demand at the profit-maximizing price of $20.

You are the owner of a mom-and-pop store that buys milk from a supplier at a cost of $1 per gallon.If you estimate the elasticity of demand for milk sold at your store to be -3.5, what are your profit-maximizing markup and price?

If a product is perceived by consumers as homogeneous, which of the following strategies will work to induce brand loyalty?

The idea of charging two different groups of consumers two different prices is practiced in:

Which of the following statements is true?

If the profit-maximizing markup factor in a 10-firm Cournot oligopoly is -2, what is the corresponding market elasticity of demand?

Which of the following is a correct statement?

Price matching strategies may fail to enhance profits when:

Which of the following is true regarding the relationship between the elasticity of demand for an individual firm and the elasticity of demand for the market in a Cournot oligopoly with 5 identical firms?

Which of the following statements about a price matching strategy is incorrect?

If the profit-maximizing markup factor in a 3-firm Cournot oligopoly is -2, what is the corresponding market elasticity of demand?

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.Which of the following is the marginal revenue function for the firm?

Suppose that the demand for a monopolist's product is estimated to be Q^d = 100 - 2P and it's total costs are C(Q) = 10Q.Under first-degree price discrimination the optimal price(s) , number of total units exchanged, profit and consumer surplus are

A necessary cost-side condition for a firm to implement a cross subsidization pricing strategy is:

Exam 11: Pricing Strategies for Firms With Market Power

During low-peak times, what price-quantity combination should the firm charge to maximize profit?

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 optimal two-part pricing, it will earn profits of

One of the conditions under which price discrimination is profitable is:

A local video store estimates their average customer's demand per year is Q = 20 - 4P, and knows the marginal cost of each rental is $1.00.How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal two-part pricing strategy?

A monopoly producing X at a marginal cost of $10 per unit and charges a price of $20 per unit.Determine the elasticity of demand at the profit-maximizing price of $20.

You are the owner of a mom-and-pop store that buys milk from a supplier at a cost of $1 per gallon.If you estimate the elasticity of demand for milk sold at your store to be -3.5, what are your profit-maximizing markup and price?

If a product is perceived by consumers as homogeneous, which of the following strategies will work to induce brand loyalty?

The idea of charging two different groups of consumers two different prices is practiced in:

Which of the following statements is true?

If the profit-maximizing markup factor in a 10-firm Cournot oligopoly is -2, what is the corresponding market elasticity of demand?

Which of the following is a correct statement?

Price matching strategies may fail to enhance profits when:

Which of the following is true regarding the relationship between the elasticity of demand for an individual firm and the elasticity of demand for the market in a Cournot oligopoly with 5 identical firms?

Which of the following statements about a price matching strategy is incorrect?

If the profit-maximizing markup factor in a 3-firm Cournot oligopoly is -2, what is the corresponding market elasticity of demand?

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.Which of the following is the marginal revenue function for the firm?

Suppose that the demand for a monopolist's product is estimated to be Qd = 100 - 2P and it's total costs are C(Q) = 10Q.Under first-degree price discrimination the optimal price(s) , number of total units exchanged, profit and consumer surplus are

A necessary cost-side condition for a firm to implement a cross subsidization pricing strategy is:

Suppose that the demand for a monopolist's product is estimated to be Q^d = 100 - 2P and it's total costs are C(Q) = 10Q.Under first-degree price discrimination the optimal price(s) , number of total units exchanged, profit and consumer surplus are