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1. Which of the following statements is correct for a firm that can price-discriminate?

a) It should adjust prices so that customers with price-inelastic demand pay higher prices than those with elastic

demand.

b) It should adjust prices so that customers with price-inelastic demand pay lower prices than those with elastic

demand.

c) It should adjust prices so that customers with price-elastic demand pay lower prices than those with inelastic

demand.

d) It should adjust prices so that customers with price-elastic demand pay higher prices than those with inelastic

demand.

2. Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will

charge the lower price to the group with:

a) the fewer close substitutes.

b) the lower price elasticity of demand.

c) the higher price elasticity of demand.

d) The answer cannot be determined with the information given.

3. Many hotel chains offer discounts for senior citizens. This is an example of ________ that is ________ in the United

States.

a) single-price monopoly power; legal

b) price discrimination; legal

c) market power; illegal

d) price discrimination; illegal

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019
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Related questions

1. Which of the following allows a competitive firm to exercise monopoly power?

a. Control over some significant factors of production.

b. Production of a homogenous commodity.

c. Always maximizing profit.

d. Increasing industry-wide average costs

Ā 

2.Ā Which of the following statements is true about monopolies?

a. Monopolies always earn economic profits.

b. If the price falls below the minimum AVC, the monopolist shuts down its plant.

Ā 

3.Ā If a monopolist is practicing third-degree price discrimination:

a. Customers with lower elasticities of demand will be charged the same price as customers with higher elasticities of demand.

b. Customers with lower elasticities of demand will be charged lower prices than customers with higher elasticities of demand.

c. It must allow arbitrage to occur.

d. Customers with lower elasticities of demand will be charged higher prices than customers with higher elasticities.

Ā 

4.Ā Economist Gordon Tullock suggests that monopolists may use up their ______________ to engage in rent-seeking behaviour.

a. Marginal revenue

b. Deadweight loss

c. Economic profits

d. Marginal costs

When a monopoly lowers its price to increase quantity,

a. The quantity produced drives down marginal revenue

b. It will increase its profits

c. It will make less money on the units it would have orginally sold

d. It is not maximizing its profit

Which of the following statements is TRUE?

a. Both A and B

b. A monopoly can charge whatever it wants

c. Profit maximizatin occurs by setting price first

d. A monopoly cannot set price and quantity such that the point lies above the demand curve

A monopoly that is maximizing profits operates is the _______ portion of the demand curve

a. Unitary elastic

b. Horizontal

c. Elastic

d. Inelastic

A monopoly shuts down when,

a. The long run price is below its average variable cost

b. Never, because it can raise its prices as high as necessary to keep operating and maximizing profits

c. The short run price is below its average variable cost

d. The average cost is less than price

The ability of a monopoly to charge a price that exceeds marginal cost depends on,

a. Shape of the marginal cost curve

b. The price elasticity of supply

c. Price elasticity of demand

d. Slope of the demand curve

Which of the following could create a cost advantage for a monopoly?

a. Lower friction due to better organization

b. Better technology

c. All of the above

d. Standardization

Price discrimination,

a. Is illegal in the U.S.

b. Is when consumers use prices to discriminate between different quality products

c. Is a form of pricing where consumers pay different prices for a good

d. Allows firms to set a single intermediate price between consumers' low and high willingness to pay

Which of the following is likely hardest to resell?

a. The free facial you won at a raffel

b. An apple iPod

c. A coupon for a free haircut

d. A discount airline tickey you bought with your frequent flyer miles

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities; then,

a. Consuers who buy larger quantities have a higher price elastiity of demand

b. Consumers who buy smaller quantities have a lower price elasticity of demand

c. Both A and C

d. Consumers who buy larger quantities have a lower price elasticity of demand

Purchasing a season pass t the local symphony,

a. Is an example of third degree price discrimination

b. Is an example of second degree price discrimination

c. Is an example of first degree price discrimination

d. All of the above

PLEASE ANSWER EACH QUESTION WITH A, B, C, and D. NOT ANSWERING ALL QUESTIONS OR INCORRECT ANSWERS WILL RESULT IN A THUMBS DOWN.

Question 1: Which of the following is not needed for price discrimination to be possible?

Ā  Ā 

A. The firm must have market power.
Ā  Ā 

B. The firm must be able to prevent resale and arbitrage.
Ā  Ā 

C. The firm must eventually learn about its customers' demands.
Ā  Ā 

D. The firm's customers must have different demand curves.

Ā 

Question 2: Relative to standard monopoly pricing, first-degree price discrimination results in:

Ā  A.

higher consumer surplus, higher producer surplus, and higher total surplus.
Ā  B.

lower consumer surplus, higher producer surplus, and higher total surplus.
Ā  C.

lower consumer surplus, higher producer surplus, and lower total surplus.
Ā  D.

lower consumer surplus, lower producer surplus, and lower total surplus.

Ā 

Question 3: Relative to perfect competition, first-degree price discrimination results in:

Ā  Ā 

A. higher consumer surplus, higher producer surplus, and higher total surplus.
Ā  Ā 

B. lower consumer surplus, higher producer surplus, and equal total surplus.
Ā  Ā 

C. lower consumer surplus, higher producer surplus, and equal total surplus.
Ā  Ā 

D. lower consumer surplus, lower producer surplus, and lower total surplus.

Question 4: If market demand is P = 100 - Q and the firm has a constant marginal cost of 20, then with first-degree price discrimination, the firm's producer surplus will be:

A.

$800.
B.

$1,600.
C.

$2,400.
D.

$3,200.

Question 5: For third-degree discrimination to be possible, which of the following features is not required?

Ā  Ā 

A. market power
Ā  Ā 

B. prevention of resale
Ā  Ā 

C. identification of each customer's demand before purchase
Ā  Ā 

D. customers with different demand curves

Ā 

Question 6: A golf course has frequent players whose demand is Qf = 260 - 0.4P and infrequent players whose demand is Qi = 10 - 0.1P. The combined market demand is Q = 34 - 0.4P. The marginal cost and average total cost of providing a round of golf are $20. How much higher will the profit be if the golf course uses third-degree price discrimination instead of charging all golfers the same price?

A.

$0
B.

$7.50
C.

$10
D.

$110

Ā 

Question 7: An airline sells seats on its flights to business travelers whose demand is QB = 300 - P and vacation travelers whose demand is QV = 150 - 0.5P. The combined market demand is Q = 450 - 1.5P. The marginal cost and average total cost of providing a seat on a flight are $200. How much higher will profit be if the airline uses third-degree price discrimination instead of charging all travelers the same price?

A.

$0
B.

$250
C.

$400
D.

$1,000

Ā 

Question 8: If a firm practices third-degree price discrimination, the price charged should be higher in the market where demand is:

Ā  A.

Higher.
Ā  B.

Lower.
Ā  C.

More price elastic.
Ā  D.

Less price is elastic.

Ā 

Question 9: The key difference between markets where third-degree price discrimination is possible and markets where second-degree price discrimination is possible is whether:

Ā  Ā 

A. resale is possible.
Ā  Ā 

B. customers have the same demand curves.
Ā  Ā 

C. firms have market power.
Ā  Ā 

D. firms can identify customers' demand before the customers make a purchase.

Ā 

Question 10: For price discrimination via a quantity discount to work:

Ā  Ā 

A. customers who purchase larger quantities must have relatively elastic demand.
Ā  Ā 

B. customers who purchase larger quantities must have relatively inelastic demand.
Ā  Ā 

C. customers who pay a relatively high price must have relatively elastic demand.
Ā  Ā 

D. customers who pay a relatively low price must have relatively inelastic demand.

Ā 

Question 11: A firm wants to offer a quantity discount to price-discriminate between buyers who are relatively uninterested in the product and buyers who are obsessively interested in it. The uninterested customers have a demand of QU = 30 - 0.5P. The package offered to them contains 10 units of the good at a price of $40 each. Which of the following packages designed for obsessed customers is incentive compatible?

Ā  A.Ā 

60 units at a price of $10 each
Ā  B.

40 units at a price of $10 each
Ā  C.

60 units at a price of $20 each
Ā  D.

40 units at a price of $20 each

Ā 

Question 12: Which of the following conditions do not have to be met in order for indirect price discrimination by versioning to work?

Ā  Ā 

A.The firm's customers must have different demand curves.
Ā  Ā 

B. The marginal costs of producing each version of the product must be the same.
Ā  Ā 

C. The firm must be able to prevent resale.
Ā  Ā 

D. The firm must have market power.

Ā 

Ā 

Willingness to pay (per month)
Ā 

Weight machines

Indoor pool

Abe

$60

$50

Betty

50

125

Chris

25

140

Ā 

QUESTION 13
This table shows the willingness to pay off the only three potential customers of a firm that runs both a weight room and an indoor swimming pool. The weight room and pool each have a constant marginal cost of $20 per month. Which of the following pricing strategies yields the highest producer surplus?

Ā  Ā 

A. $60 for the weight room, $140 for the pool, or $175 for both
Ā  Ā 

B. $50 for the weight room, $125 for the pool, or $165 for both
Ā  Ā 

C. $25 for the weight room, $50 for the pool, or $70 for both
Ā  Ā 

D. $60 for the weight room, $130 for the pool, or $175 for both

Ā 

Question 14: Which of the following features is needed to make bundling a possible price discrimination strategy but is not required for any other price discrimination strategies?

Ā  Ā 

A. Customers must have identical demand curves.
Ā  Ā 

B. The firm does not learn about customer demand until after purchase.
Ā  Ā 

C. Demand for two products must be negatively correlated.
Ā  Ā 

D. The firm must not have market power.

Ā 

Question 15: Which of the following features is not needed for price discrimination using a two-part tariff to work?

Ā  Ā 

A. The firm must have market power.
Ā  Ā 

B. The firm must be able to prevent resale.
Ā  Ā 

C. The firm must learn about its customers' demands before purchases are made.
Ā  Ā 

D. The firm's customers must have different demand curves.

Ā 

Question 16: A firm faces a market demand curve P = 50 - 5Q. It has a constant marginal cost of $10. Relative to standard monopoly pricing, how would a block pricing strategy where the first four units can be purchased for a price of $30 each, but two more units can be purchased for an additional $20 each change consumer surplus and producer surplus?

Ā  Ā 

A. Consumer surplus would decrease by $10, and producer surplus would increase by $20.
Ā  Ā 

B. Consumer surplus would increase by $10, and producer surplus would increase by $20.
Ā  Ā 

C. Consumer surplus would increase by $20, and producer surplus would increase by $10.
Ā  Ā 

D. Consumer surplus would increase by $20, and producer surplus would increase by $20.

Ā 

Question 17: Relative to standard monopoly pricing, block pricing:

Ā  Ā 

A. decreases consumer surplus, increases producer surplus, and increases total surplus.
Ā  Ā 

B. increases consumer surplus, increases producer surplus, and increases total surplus.
Ā  Ā 

C. decreases consumer surplus, increases producer surplus, and decreases total surplus.
Ā  Ā 

D. decreases consumer surplus, decreases producer surplus, and decreases total surplus.

Ā 

Question 18: Which of the following results in the highest amount of producer surplus?

Ā  A.

bundling
Ā  B.

third-degree price discrimination
Ā  C.

block pricing
Ā  D.

two-part tariffs

Ā 

Question 19: Which of the following results in the highest amount of consumer surplus?

Ā  A.

first-degree price discrimination
Ā  B.

third-degree price discrimination
Ā  C.

block pricing
Ā  D.

two-part tariffs

Ā 

Question 20: Which of the following results in the highest amount of total surplus?

Ā  A.

third-degree price discrimination
Ā  B.

block pricing
Ā  C.

first-degree price discrimination
Ā  D.

bundling

Ā 

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