question

A linear demand function exhibits:

answer

Less elastic demand as output increases.

question

Consider a monopoly where the inverse demand for its product is given by P = 200 -5Q. Based on this information, the marginal revenue function is:

answer

MR(Q) = 200 - 10Q

question

Differentiated goods are a feature of a:

answer

monopolistically competitive market.

question

Economies of scale exist whenever

answer

average total costs decline as output increases.

question

Firms have market power in:

answer

Monopolistically competitive markets and monopolistic markets

question

Suppose that initially the price is $50 in a perfectly competitive market. Firms aremaking zero economic profits. Then the market demand shrinks permanently andsome firms leave the industry and the industry returns back to a long-run equilibrium.What will be the new equilibrium price, assuming cost conditions in the industryremain constant?

answer

$50

question

Which of the following is a correct representation of the profit-maximization condition for a monopoly?

Multiple Choice

Multiple Choice

answer

MC = MR

question

Which of the following is true under monopolistic competition in the long run?

answer

Profits are always zero

question

Which of the following is true under monopoly?

answer

P > MC

question

Which of the following market structures would you expect to yield the greatest product variety?

answer

Monopolistic competition

question

Which of the following statements is NOT correct about monopoly?

answer

Monopolists always make positive profits in the long run.

question

A monopoly has two production plants with cost functions C1 = 50 + 0.1 Q12 and C2 = 30 + 0.05 Q22. The demand it faces is Q = 500 - 10 P. What is the condition for profit maximization?

answer

MC1(Q1) = MC2(Q2) = MR(Q1 + Q2)

question

You are the manager of a monopoly that faces a demand curve described by P = 230 - 20 Q. Your costs are C = 5 + 30 Q. The profit-maximizing output of your firm is:

answer

5

question

You are the manager of a monopoly faces a demand curve described by P = 230-20Q. Your costs are C=5+30Q. The profit maximizing price is

answer

130

question

You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. Your firm's maximum profits are

answer

495

question

A Broadway theater sells weekday show tickets at a lower price than for a weekend show. This is an example of:

answer

price discrimination or peak-load pricing.

question

A local video store estimates its average customer's demand per year is Q = 7 − 2P, and it knows the marginal cost of each rental is $0.5. 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?

answer

$9

question

A local video store estimates their average customer's demand per year is Q = 7 -2P, and knows the marginal cost of each rental is $0.5. How much should the store charge for each rental if it engages in optimal two part pricing?

answer

$0.5

question

A study has estimated the effect in interest rates and consumer confidence on the demand for money to be: ln M = 14.666 + .021 ln C - 0.036 ln r, where M denotes real money balances, C is an index of consumer confidence, and r is the interest rate paid on bank deposits. Based on this study, 5% increase in interest rates will cause the demand for money to:

answer

drop by .18%

question

During spring break, students have an elasticity of demand for a trip to Florida of -3. How much should an airline charge students for a ticket if the price it charges the general public is $360? Assume the general public has a price-elasticity of demand of -2.

answer

$270

question

First-degree price discrimination

answer

occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers.

question

If the cross-price elasticity between ketchup and hamburgers is -1.2, a 4% increase in the price of ketchup will lead to a 4.8% ____?

answer

Drop in quantity demanded of hamburgers

question

Snowpeak Ski Resort offers a price for a lift ticket that is barely over its marginal cost, but the high equipment rental fee keeps generating big profits. Which pricing strategy is the management using?

answer

cross-subsidization

question

Suppose Qxd = 10,000 - 2 Px + 3 Py - 4.5M, where Px = $100, Py = $50, and M = $2,000. What is the own price elasticity of demand?

answer

-.021

question

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

answer

price discrimination

question

The own-price elasticity of demand for apples is -1.2. If the price of apples falls by 5%, what will happen to the quantity of apples demanded?

answer

It will increase 6%

question

When two or more divisions mark up prices in excess of marginal cost:

answer

double marginalization occurs

question

What price should a firm charge for a package of two shirts given a marginal cost of $4 and an inverse demand function P = 8 - 2Q by the representative consumer?

answer

$12

question

Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?

answer

P = MC