Econ3357 Test 4 - Assignment Essays

question

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. Suppose that a tax of $5 for each unit produced is imposed by state government. How much profit does the monopolist earn?

answer

$4050

question

DVDs can be produced at a constant marginal cost of $5 per disk, and Roaring Lion Studios is releasing the DVDs for its last two major films. The DVD for Rambeau 17 is priced at $20 per disk, and the DVD for Schreck 10 is priced at $30 per disk. What are the price elasticities of demand for these two movies?

answer

-1.33 and -1.2, respectively

question

The Lerner index measures:

answer

The amount of monopoly power a firm chooses to exercises when maximizing profits

question

Use the following two statements to answer this question:
I. A firm can exert monopoly power if and only if it is the sole producer of a good.
II. The degree of monopoly power a firm possesses can be measured using the Lerner Index: L=(P-MC)/P

answer

Both I and II are false.

question

A multiplant firm has equated marginal costs at each plant. By doing this

answer

Costs are minimized given the output level

question

DVDs can be produced at a constant marginal cost of $10 per disk, and Roaring Lion Studios is releasing the DVDs for its last two major films. The DVD for Rambeau 17 is priced at $20 per disk, and the DVD for Schreck 10 is priced at $30 per disk. What are the Lerner indices for these two movies?

answer

0.5 and 0.67 respectively

question

If the regulatory agency sets a price where AR = AC for a natural monopoly, output will be:

answer

greater than the monopoly profit maximizing level and less than the competitive level

question

When the demand curve is downward sloping, marginal revenue is

answer

less than price

question

The demand curve and marginal revenue curve for red herrings are given as follows:
Q = 250 - 5P
MR = 50 - 0.4Q
Refer to Scenario 10.3. Compared to a competitive red herring industry, the monopolistic red herring industry:

answer

produces less output at a higher price

question

Which of the following regarding natural monopolies is true

answer

for natural monopolies, marginal cost is always below average cost

question

Which of the following is true when the government imposes a price ceiling on a monopolist

answer

Marginal revenue is kinked-horizontal and then downward sloping

question

Which monopoly charges a greater price markup

answer

The monopoly in panel B (the one with the steeper demand curve)

question

The demand curve and marginal revenue curve for red herrings are given as follows:
Q = 250 - 5P
MR = 50 - 0.4Q
Refer to Scenario 10.3. What level of output maximizes revenue?

answer

125

question

Roaring Lion Studios can produce DVDs at a constant marginal cost of $5 per disk, and the studio has just releasing the DVD for its latest hit film, Ernest Goes to the Hamptons. The retail price of the DVD is $25, and the elasticity of demand for this film is -2. Has the studio selected the profit-maximizing retail price for this DVD?

answer

No, the retail price is too high

question

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?

answer

It decreases by $1000

question

A monopolist has equated marginal revenue to zero. The firm has:

answer

maximized revenue

question

answer

question

Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows:

AC = Q + (10,000/Q)

MC = 2QAR = 30 - (Q/2)MR = 30 - Q
Refer to Scenario 10.8. The deadweight loss from monopoly is:

answer

5 ( this is the difference between MR and AR)

question

The monopolist that maximizes profit:

answer

imposes a cost on society because the selling price is above marginal cost.

question

The monopolist has no supply curve because:

answer

the quantity supplied at any particular price depends on the monopolist's demand curve

question

Refer to Figure 10.4.1 above. The producer net gains equal

answer

area A - C

question

The demand for tickets to the Katy Perry concert (Q) is given as follows:
Q = 120,000 - 2,000P
The marginal revenue is given as:
MR = 60 - .001Q
The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.
A multiplant monopolist can produce her output in either of two plants. Having sold all of her output she discovers that the marginal cost in plant 1 is $30 while the marginal cost in plant 2 is $20. To maximize profits the firm will:

answer

produce less output in plant 1 and more in plant 2

question

Suppose a government sets the price for a natural monopoly at the competitive level such that P = MC. To keep the seller from taking a loss under this policy, the government could provide a lump-sum payment to the firm. How could we determine this payment?

answer

Multiply the competitive quantity by the difference between MC and AC

question

Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows:

P = 360 - 4Q

MR = 360 - 8QMC = 4Q
Refer to Scenario 10.9. At the profit maximizing level of output, what is the deadweight loss?

answer

900

question

You work as a marketing analyst for a pharmaceutical firm, and you are trying to gather information about the marginal cost of production for a competing firm. You know that they have a patent on a popular medication that sells for $20 per dose, and you believe the elasticity of demand for this product is roughly -4. Assuming the competing firm acts as a profit-maximizing monopolist, what is the competing firm's approximate marginal cost of production?

answer

$15 per dose

question

DVDs can be produced at a constant marginal cost, and Roaring Lion Studios is releasing the DVDs for its last two major films. The DVD for Rambeau 17 is priced at $20 per disk, and the DVD for Schreck 10 is priced at $30 per disk. If the Lerner indices for Rambeau 17 divided by the Lerner index for Schreck 10 equals 0.5, what is the constant marginal cost of producing both DVDs?

answer

MC = $15

question

The demand for tickets to the Katy Perry concert (Q) is given as follows:
Q = 120,000 - 2,000P
The marginal revenue is given as:
MR = 60 - .001Q
The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.
Refer to Scenario 10.4. Suppose that the municipal stadium authority imposes a tax of $10 per ticket on the concert promoters. Given the information above, the profit maximizing ticket price would:

answer

increase by $5

question

Zinc Communications developed a new type of cellular telephone that has a three-dimensional (3-D) screen. The company holds a patent on this technology, so they are the only seller of the 3-D phone when it is introduced. Over time, other companies introduce phones that are similar but not identical (i.e., they do not violate the patent held by Zinc). What happens to the demand for 3-D phones facing Zinc and to the profit-maximizing price for the 3-D phone as these similar products enter the market?

answer

Demand becomes more elastic, price declines

question

Suppose there are seven firms in a market where the three largest firms supply 20% of the market-clearing quantity and the other four firms supply 10% of the market-clearing quantity. What is the five-firm concentration ratio (i.e., the share of total sales controlled by the five largest firms in the market)?

answer

80%

question

Which of the following is NOT true regarding monopoly?

answer

Monopolist can charge as high a price as it likes

question

answer

question

Refer to Figure 10.4.2 above. The minimum feasible price is:

answer

question

To find the profit maximizing level of output, a firm finds the output level where:

answer

None of these

question

With respect to monopolies, deadweight loss refers to the:

answer

Net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy

question

The more elastic the demand facing a firm,

answer

the lower the value of the Lerner index

question

Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows:

Q = 160 - 4P

TR = 40Q - 0.25Q^2
MR = 40 - 0.5Q
TC = 4Q
MC = 4
Refer to Scenario 10.1. How much output will Barbara produce?

answer

question

Monopoly power results from the ability to:

answer

set price above marginal cost

question

answer

$55.00

question

answer

question

Refer to Figure 10.4.2 above. Suppose that the government decides to limit monopoly power with price regulation. If the government sets the price at the competitive level, it will set the price at:

answer

question

Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the:

answer

Firm's output is smaller than the profit maximizing quantity.

question

Suppose that the competitive market for rice in Japan was suddenly monopolized. The effect of such a change would be:

answer

to decrease the consumer surplus of Japanese rice consumers

question

Suppose that a tax of $2 per unit of output is imposed on red rubber ball producers. What level of output maximizes profit?

answer

question

The demand curve and marginal revenue curve for red rubber balls are given as follows:

Q = 16 - P

MR = 16 - 2Q
What level of output maximizes profit?

answer

question

John is the manufacturer of red rubber balls (Q). He has a red rubber ball manufacturing plant in California, Florida and Montana. The total cost of producing red rubber balls at each of the three plants is given by the following table:

Refer to Scenario 10.6. If red rubber balls can be produced at any of the three plants, what is the marginal cost of 5th red rubber ball?

answer

question

The cartel of oil-producing nations (OPEC) once controlled about 80% of the world petroleum market, but OPEC's market share has declined to about half of its former level. This outcome is a good example of how firms may have:

answer

relatively high short-run monopoly power that declines in the long run

question

If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profit must be:

answer

positive

question

Refer to Figure 10.4.3. In moving from the competitive level of output and price to the monopoly level of output and price, the deadweight loss is the area:

answer

GEH

question

The demand curve and marginal revenue curve for red herrings are given as follows:
Q = 250 - 5P
MR = 50 - 0.4Q
Refer to Scenario 10.3. The marginal cost of red herrings is given as: MC = 0.6Q. What is the profit-maximizing level of output?

answer

question

For a monopolist, changes in demand will lead to changes in:
a.) price with no change in output.
b.) output with no change in price.
c.) both price and quantity.
d.) Any of these can be true.

answer

Any of these can be true

question

The monopoly supply curve is the:
a.) same as the competitive market supply curve.
b.) portion of marginal costs curve where marginal costs exceed the minimum value of average variable costs.
c.) result of market power and production costs.
d.) None of these

answer

None of these

question

The marginal cost of a monopolist is constant and is $10. The marginal revenue curve is given as follows:
MR = 100 - 2Q
The profit maximizing price is:

answer

$55

question

answer

1800

question

The regulatory lag:

answer

is likely to occur with the rate-of-return regulation

question

As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should:

answer

reduce output until marginal revenue equals marginal cost

question

Suppose your firm develops a new pharmaceutical product that may be used to reduce blood cholesterol levels, so the firm is the monopoly seller of this drug. If the elasticity of demand for this new product is -4, what markup should your firm use to set the profit-maximizing price for the product?

answer

the price-cost markup is 25% of the price

question

A firm produces garden hoses in California and in Ohio. The marginal cost of producing garden hoses in the two states and the marginal revenue from producing garden hoses are given in the following table:
Refer to Scenario 10.5. From the perspective of the firm, what is the marginal cost of the 5th garden hose?

answer

question

Refer to Scenario 10.9. What is the maximum amount that Maui Macadamia would be willing to spend in order to maintain its monopoly through rent seeking?

answer

$5400

question

The marginal revenue of green ink pads is given as follows:
MR = 2500 - 5Q
The marginal cost of green ink pads is 5Q.
Refer to Scenario 10.7. How many ink pads will be produced to maximize profit?

answer

250

question

answer

100

question

The demand for tickets to the Katy Perry concert (Q) is given as follows:
Q = 120,000 - 2,000P
The marginal revenue is given as:
MR = 60 - .001Q
The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.
Refer to Scenario 10.4. Given the information above, what are the profit maximizing number of tickets sold and the price of tickets?

answer

60,000; $30

question

Which of the following is true at the output level where P = MC?

answer

The monopolist is not maximizing profit and should decrease output

question

Refer to Figure 10.4.3. At output Qm, and assuming that the monopoly has set her price to maximize profit, the consumer surplus is:

answer

CDE

question

A manufacturer of digital music players uses a proprietary file format that is not used by the other firms in the market. This action by the firm may be an example of using a ________ to reduce the number of firms in the market and to maintain a relatively inelastic demand for its products.

answer

barrier to entry

question

answer

question

The marginal revenue of green ink pads is given as follows:
MR = 2500 - 5Q
The marginal cost of green ink pads is 5Q.
Refer to Scenario 10.7. Suppose that the firm chooses to produce 200 ink pads. At this level of output the demand for ink pads is:

answer

elastic

question

At the profit-maximizing level of output, demand is:

answer

elastic, but not infinitely elastic

question

The demand curve and marginal revenue curve for red herrings are given as follows:
Q = 250 - 5P
MR = 50 - 0.4Q
Refer to Scenario 10.3. At the profit-maximizing level of output, demand is:

answer

elastic, but not infinitely elastic

question

answer

5,400

question

What is the value of the Lerner index under perfect competition?

answer

question

Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows:

AC = Q + (10,000/Q)

MC = 2QAR = 30 - (Q/2)MR = 30 - Q

Refer to Scenario 10.8. Suppose that the regulatory agency sets your price where average revenue equals average cost. How much profit will Adriana make?

answer

She will break even

question

Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the:

answer

firm's output is smaller than the profit maximizing quantity

question

A firm produces garden hoses in California and in Ohio. The marginal cost of producing garden hoses in the two states and the marginal revenue from producing garden hoses are given in the following table:

Refer to Scenario 10.5. How many garden hoses should be produced in California in order to maximize profits?

answer

question

Refer to Figure 10.4.3. In moving from the competitive level of output and price to the monopoly level of output and price, the monopolist is able to add to producer surplus:

answer

The area BCEF less the area GFH

question

answer

elastic

question

Deadweight loss from monopoly power is expressed on a graph as the area between the:

answer

average revenue curve and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets.

question

Assume that a firm's marginal cost is $10 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately:

answer

$20

question

answer

$55

question

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output?

answer

question

The marginal revenue of green ink pads is given as follows:
MR = 2500 - 5Q
The marginal cost of green ink pads is 5Q.
Refer to Scenario 10.7. How many ink pads will be produced to maximize revenue?

answer

500

question

Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?

answer

When there are few firms in the market and the demand curve faced by each firm is relatively inelastic

question

The ________ elastic a firm's demand curve, the greater its ________.

answer

less; monopoly power

question

Which of the following strategies are used by business firms to capture consumer surplus?

answer

All of these (price discrimination, bundling, two part tariffs)

question

Under perfect price discrimination, consumer surplus:

answer

equals zero

question

A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of:

answer

peak-load pricing

question

A firm setting a two-part tariff with only one customer should set the entry fee equal to:

answer

consumer surplus

question

Which of the following product pairs would NOT be good candidates for price discrimination through tying?

answer

Pencils and paper

question

For a perfect first-degree price discriminator, incremental revenue is:

answer

equal to the price paid for each unit of output

question

Second-degree price discrimination is the practice of charging:

answer

different prices for different quantity blocks of the same good or services

question

Discrimination based upon the quantity consumed is referred to as ________ price discrimination.

answer

second-degree

question

A local restaurant offers an "all-you-can-eat" salad bar for $3.49. However, with any sandwich, a customer can add the "all-you-can-eat" salad bar for $1.49. This is an example of:

answer

None of these

question

The price of on-campus parking from 8:00 AM to 5:00 PM, Monday through Friday, is $3.00. From 5:00 PM to 10:00 PM, Monday through Friday, the price is $1.00. At all other times parking is free. This is an example of:

answer

none of these

question

The maximum price that a consumer is willing to pay for a good is called:

answer

the reservation price

question

Many cellular phone rate plans are structured as a combination of ________ price discrimination

answer

second-degree and third-degree

question

The local cable TV company charges a "hook-up" fee of $30 per month. Customers can then watch programs on a "pay-per-view" basis (a fee is charged for every program watched). This is an example of:

answer

a two-part tariff

question

If there are open first-class seats available on a particular flight, some airlines allow customers with coach (discount) tickets to upgrade to first-class tickets during the electronic check-in process. Suppose the regular price of a first-class ticket is $800, the total price of the upgrade ticket (original price plus the upgrade) is $400, the marginal cost of serving both types of customers (full-fare and upgrade first-class flyers) is $100, and the airline maximizes profits. Which of the following statements is true?

answer

MR must be the same for both full-fare and upgrade customers.

question

When the movie Jurassic Park debuted in Westwood, California, the price of tickets was $7.50. After several months the ticket price had fallen to $4.00. This is an example of:

answer

None of these

question

Refer to Figure 11.3.2 above. This figure is a representation of:

answer

peak-load pricing, which is different from third-degree price discrimination.

question

Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:

answer

is attempting to convert consumer surplus into producer surplus.

question

The manager of a firm is attempting to practice third degree price discrimination. She has equated the marginal revenue in each of her markets. By doing this, her:

answer

revenues are maximized, given her level of output.

question

Your local grocery store offers a coupon that reduces the price of milk during the coming week. The regular retail price of milk in the store is $3.00 per gallon, and the coupon price is $2.00 per gallon for the next week. If the store maximizes profits and the price elasticity of demand for milk is -2 for coupon users, what is the price elasticity of demand for non-users?

answer

-1.5

question

The pricing technique known as tying:

answer

All of these (permits a firm to meter demand, permits a firm to practice price discrimination, enables a firm to extend its monopoly power to new markets

question

A local theater charges $5.00 for every matinee (daytime) ticket, but the ticket prices are much higher during the evening. This is an example of:

answer

peak-load pricing

question

Refer to Figure 11.2.1 above. When the firm charges the reservation price to each consumer, the additional profit equals area:

answer

C+D

question

n 1994, the Walt Disney Corporation ran a special promotion on tickets to Disneyland. Residents of southern California who lived near the amusement park were offered admission at the special price of $22. Other visitors to Disneyland were charged about $30. This practice is an example of:

answer

price descrimination

question

A doctor charges two different prices for medical services, and the price level depends on the patients' income such that wealthy patients are charged more than poorer ones. This pricing scheme represents a form of:

answer

third-degree price discrimination

question

Club Med, which operates a number of vacation resorts, offers vacation packages at a lower price in the winter (i.e., the "off season") than in the summer. This practice is an example of:

answer

Both peak-load pricing and intertemporal price discrimination are correct.

question

The authors explain that the marginal cost of production does not have to be constant in order to maximize profits under intertemporal price discrimination. Which of the following is NOT an example of changing marginal costs under profit-maximizing intertemporal price discrimination?

answer

Marginal cost increases sharply after the initial marketing stages when the product is sold to the broader market of consumers.

question

A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing:

answer

third-degree price discrimination

question

A firm sells an identical product to two groups of consumers, A and B. The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximize profits. Which of the following best describes the price and output strategy that will maximize profits?

answer

MRA = MRB = MC.

question

Season ticket holders for the St. Louis Rams received a surprise when they read the applications forms to renew their season tickets. In order to get their season ticket to the Rams' home games, they also had to buy tickets to the preseason games. Many season ticket holders grumbled about this practice as an underhanded way for the St. Louis Rams to get more money from its season ticket holders. This practice is an example of:

answer

bundling

question

Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct?

answer

The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.

question

In peak-load pricing,

answer

marginal revenue in the peak period is greater than in the off-peak period.

question

Automobile manufacturers commonly sell new car models at the full suggested retail price during the first few years the car is on the market, and they do not offer rebates or discounts. After the initial sales period, the manufacturers typically offer rebates or discounts on these models. The marginal cost of manufacturing the cars is constant across time. Which of the following statements is true?

answer

Early buyers have higher reservation prices for the new models, and the manufacturers maximize profits by charging these buyers a higher price.

question

You produce stereo components for sale in two markets, foreign and domestic, and the two groups of consumers cannot trade with one another. If your firm practices third-degree price discrimination to maximize profits, the marginal revenue:

answer

All of these

question

When a firm charges each customer the maximum price that the customer is willing to pay, the firm:

answer

engages in first-degree price discrimination.

question

Suppose a firm has market power and faces a downward sloping demand curve for its product, and its marginal cost curve is upward sloping. If the firm reduces its price, then:

answer

producer surplus increases due to new buyers, but the producer surplus from existing customers declines due to the lower price.

question

A national chain of bookstores has initiated a frequent buyer program. If you buy a frequent buyer card for $10, you are entitled to a 10 percent discount on all purchases for 1 year. This practice is an example of:

answer

two-part tariff.

question

Which of the following statements about setting optimal two-part tariffs for many consumers is NOT true?

answer

The profit from the entrance fee (tariff) is a convex function of the tariff because if first declines and then increases as the tariff increases.

question

When a monopolist engages in perfect price discrimination

answer

the demand curve and the marginal revenue curve are identical.

question

An amusement park charges an entrance fee of $75 per person plus $2.50 per ride. This is an example of:

answer

a two-part tariff.

question

Mixed bundling is more profitable than pure bundling when:

answer

Both the marginal cost of each good being sold is positive and the consumers' reservation values of each good being sold are not perfectly negatively correlated with one or another are correct.

question

You produce stereo components for sale in two markets, foreign and domestic, and the two groups of consumers cannot trade with one another. You will charge the higher price in the market with the:

answer

lower own price elasticity of demand (more inelastic demand).

question

Refer to Figure 11.1.1 above. To capture the consumer surplus along the B range, the firm would ideally charge:

answer

a higher price to consumers willing to pay more and a lower price to those willing to pay less.

question

A third-degree price discriminating monopolist can sell its output either in the local market or on an internet auction site (or both). After selling all of its output, the firm discovers that the marginal revenue earned in the local market was $20 while its marginal revenue on the internet auction site was $30. To maximize profits the firm should:

answer

have sold less output in the local market and more on the internet auction site.

question

Bundling products makes sense for the seller when:

answer

both consumers have heterogeneous demands and firms cannot price discriminate.

question

Refer to Figure 11.3.1 above. The price-discriminating firm earns a higher profit by:

answer

charging a lower price as time goes by.

question

Which of the following is NOT a potential objective of tying strategies used by firms?

answer

Reduce production costs and avoid problems associated with diseconomies of scale.

question

Albatross Software has two main products: WindSong is a program that can be used to edit audio files and SunBurst is a program that can be used to edit digital photos. The two major types of customers are small businesses and home users. The small business customers have a reservation price of $300 for WindSong and $450 for SunBurst. The home users have a reservation price of $100 for WindSong and $125 for SunBurst. Which of the following statements is true?

answer

Bundling the two software products is not likely to be profitable because the demands are positively correlated.

question

Refer to Figure 11.5.1 above. The points on the figure represent the reservation prices of four different consumers. With mixed bundling:

answer

consumers A and D pay $90 for a single good, and consumers B and C pay $120 for a bundle.

question

answer

have sold less output in the local market and more on the internet auction site.

question

Which of the following is NOT a potential objective of tying strategies used by firms?

answer

Reduce production costs and avoid problems associated with diseconomies of scale.

question

answer

Bundling the two software products is not likely to be profitable because the demands are positively correlated.

question

Bindy, an 18-year-old high school graduate, and Luciana, a 40-year-old college graduate, just purchased identical hot new sports cars. Acme Insurance charges a higher rate to insure Bindy than Luciana. This practice is an example of:

answer

none of these

question

Louey's Greasy Spoon restaurant charges $15 for each dinner entree and $5 for each dessert selection, and they offer a dinner special that provide an entree and dessert for $18. If a diner at Louey's assigns zero value to dessert and $19 to an entree, what is their optimal decision?

answer

Buy only the entree

question

When a company introduces new audio products, it often initially sets the price high and lowers the price about a year later. This is an example of:

answer

intertemporal price discrimination

question

Some grocery stores are now offering customers coupons which entitle them to a discount on certain items on their next visit when they go through the check-out line. This practice is an example of:

answer

third-degree price discrimination

question

When the movie Jurassic Park debuted in Westwood, California, the price of tickets was $7.50. After several months the ticket price had fallen to $4.00. This is an example of:

answer

none of these

question

What is the key characteristic of profit maximizing price discrimination that distinguishes intertemporal price discrimination from peak-load pricing?

answer

Marginal costs are independent across time periods under peak-load pricing.

question

Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:

answer

is attempting to convert consumer surplus into producer surplus.

1 of 140

question

answer

$4050

question

answer

-1.33 and -1.2, respectively

question

The Lerner index measures:

answer

The amount of monopoly power a firm chooses to exercises when maximizing profits

question

answer

Both I and II are false.

question

A multiplant firm has equated marginal costs at each plant. By doing this

answer

Costs are minimized given the output level

question

answer

0.5 and 0.67 respectively

question

If the regulatory agency sets a price where AR = AC for a natural monopoly, output will be:

answer

greater than the monopoly profit maximizing level and less than the competitive level

question

When the demand curve is downward sloping, marginal revenue is

answer

less than price

question

answer

produces less output at a higher price

question

Which of the following regarding natural monopolies is true

answer

for natural monopolies, marginal cost is always below average cost

question

Which of the following is true when the government imposes a price ceiling on a monopolist

answer

Marginal revenue is kinked-horizontal and then downward sloping

question

Which monopoly charges a greater price markup

answer

The monopoly in panel B (the one with the steeper demand curve)

question

The demand curve and marginal revenue curve for red herrings are given as follows:
Q = 250 - 5P
MR = 50 - 0.4Q
Refer to Scenario 10.3. What level of output maximizes revenue?

answer

125

question

answer

No, the retail price is too high

question

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?

answer

It decreases by $1000

question

A monopolist has equated marginal revenue to zero. The firm has:

answer

maximized revenue

question

answer

question

answer

5 ( this is the difference between MR and AR)

question

The monopolist that maximizes profit:

answer

imposes a cost on society because the selling price is above marginal cost.

question

The monopolist has no supply curve because:

answer

the quantity supplied at any particular price depends on the monopolist's demand curve

question

Refer to Figure 10.4.1 above. The producer net gains equal

answer

area A - C

question

answer

produce less output in plant 1 and more in plant 2

question

answer

Multiply the competitive quantity by the difference between MC and AC

question

answer

900

question

answer

$15 per dose

question

answer

MC = $15

question

The demand for tickets to the Katy Perry concert (Q) is given as follows:
Q = 120,000 - 2,000P
The marginal revenue is given as:
MR = 60 - .001Q
The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.
Refer to Scenario 10.4. Suppose that the municipal stadium authority imposes a tax of $10 per ticket on the concert promoters. Given the information above, the profit maximizing ticket price would:

answer

increase by $5

question

answer

Demand becomes more elastic, price declines

question

answer

80%

question

Which of the following is NOT true regarding monopoly?

answer

Monopolist can charge as high a price as it likes

question

answer

question

Refer to Figure 10.4.2 above. The minimum feasible price is:

answer

question

To find the profit maximizing level of output, a firm finds the output level where:

answer

None of these

question

With respect to monopolies, deadweight loss refers to the:

answer

Net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy

question

The more elastic the demand facing a firm,

answer

the lower the value of the Lerner index

question

answer

question

Monopoly power results from the ability to:

answer

set price above marginal cost

question

answer

$55.00

question

answer

question

Refer to Figure 10.4.2 above. Suppose that the government decides to limit monopoly power with price regulation. If the government sets the price at the competitive level, it will set the price at:

answer

question

Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the:

answer

Firm's output is smaller than the profit maximizing quantity.

question

Suppose that the competitive market for rice in Japan was suddenly monopolized. The effect of such a change would be:

answer

to decrease the consumer surplus of Japanese rice consumers

question

Suppose that a tax of $2 per unit of output is imposed on red rubber ball producers. What level of output maximizes profit?

answer

question

The demand curve and marginal revenue curve for red rubber balls are given as follows:

Q = 16 - P

MR = 16 - 2Q
What level of output maximizes profit?

answer

question

answer

question

answer

relatively high short-run monopoly power that declines in the long run

question

If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profit must be:

answer

positive

question

Refer to Figure 10.4.3. In moving from the competitive level of output and price to the monopoly level of output and price, the deadweight loss is the area:

answer

GEH

question

answer

question

For a monopolist, changes in demand will lead to changes in:
a.) price with no change in output.
b.) output with no change in price.
c.) both price and quantity.
d.) Any of these can be true.

answer

Any of these can be true

question

answer

None of these

question

The marginal cost of a monopolist is constant and is $10. The marginal revenue curve is given as follows:
MR = 100 - 2Q
The profit maximizing price is:

answer

$55

question

answer

1800

question

The regulatory lag:

answer

is likely to occur with the rate-of-return regulation

question

As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should:

answer

reduce output until marginal revenue equals marginal cost

question

answer

the price-cost markup is 25% of the price

question

answer

question

Refer to Scenario 10.9. What is the maximum amount that Maui Macadamia would be willing to spend in order to maintain its monopoly through rent seeking?

answer

$5400

question

The marginal revenue of green ink pads is given as follows:
MR = 2500 - 5Q
The marginal cost of green ink pads is 5Q.
Refer to Scenario 10.7. How many ink pads will be produced to maximize profit?

answer

250

question

answer

100

question

The demand for tickets to the Katy Perry concert (Q) is given as follows:
Q = 120,000 - 2,000P
The marginal revenue is given as:
MR = 60 - .001Q
The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.
Refer to Scenario 10.4. Given the information above, what are the profit maximizing number of tickets sold and the price of tickets?

answer

60,000; $30

question

Which of the following is true at the output level where P = MC?

answer

The monopolist is not maximizing profit and should decrease output

question

Refer to Figure 10.4.3. At output Qm, and assuming that the monopoly has set her price to maximize profit, the consumer surplus is:

answer

CDE

question

answer

barrier to entry

question

answer

question

answer

elastic

question

At the profit-maximizing level of output, demand is:

answer

elastic, but not infinitely elastic

question

The demand curve and marginal revenue curve for red herrings are given as follows:
Q = 250 - 5P
MR = 50 - 0.4Q
Refer to Scenario 10.3. At the profit-maximizing level of output, demand is:

answer

elastic, but not infinitely elastic

question

answer

5,400

question

What is the value of the Lerner index under perfect competition?

answer

question

Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows:

AC = Q + (10,000/Q)

MC = 2QAR = 30 - (Q/2)MR = 30 - Q

Refer to Scenario 10.8. Suppose that the regulatory agency sets your price where average revenue equals average cost. How much profit will Adriana make?

answer

She will break even

question

Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the:

answer

firm's output is smaller than the profit maximizing quantity

question

A firm produces garden hoses in California and in Ohio. The marginal cost of producing garden hoses in the two states and the marginal revenue from producing garden hoses are given in the following table:

Refer to Scenario 10.5. How many garden hoses should be produced in California in order to maximize profits?

answer

question

Refer to Figure 10.4.3. In moving from the competitive level of output and price to the monopoly level of output and price, the monopolist is able to add to producer surplus:

answer

The area BCEF less the area GFH

question

answer

elastic

question

Deadweight loss from monopoly power is expressed on a graph as the area between the:

answer

average revenue curve and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets.

question

Assume that a firm's marginal cost is $10 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately:

answer

$20

question

answer

$55

question

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output?

answer

question

The marginal revenue of green ink pads is given as follows:
MR = 2500 - 5Q
The marginal cost of green ink pads is 5Q.
Refer to Scenario 10.7. How many ink pads will be produced to maximize revenue?

answer

500

question

Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?

answer

When there are few firms in the market and the demand curve faced by each firm is relatively inelastic

question

The ________ elastic a firm's demand curve, the greater its ________.

answer

less; monopoly power

question

Which of the following strategies are used by business firms to capture consumer surplus?

answer

All of these (price discrimination, bundling, two part tariffs)

question

Under perfect price discrimination, consumer surplus:

answer

equals zero

question

A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of:

answer

peak-load pricing

question

A firm setting a two-part tariff with only one customer should set the entry fee equal to:

answer

consumer surplus

question

Which of the following product pairs would NOT be good candidates for price discrimination through tying?

answer

Pencils and paper

question

For a perfect first-degree price discriminator, incremental revenue is:

answer

equal to the price paid for each unit of output

question

Second-degree price discrimination is the practice of charging:

answer

different prices for different quantity blocks of the same good or services

question

Discrimination based upon the quantity consumed is referred to as ________ price discrimination.

answer

second-degree

question

A local restaurant offers an "all-you-can-eat" salad bar for $3.49. However, with any sandwich, a customer can add the "all-you-can-eat" salad bar for $1.49. This is an example of:

answer

None of these

question

answer

none of these

question

The maximum price that a consumer is willing to pay for a good is called:

answer

the reservation price

question

Many cellular phone rate plans are structured as a combination of ________ price discrimination

answer

second-degree and third-degree

question

The local cable TV company charges a "hook-up" fee of $30 per month. Customers can then watch programs on a "pay-per-view" basis (a fee is charged for every program watched). This is an example of:

answer

a two-part tariff

question

answer

MR must be the same for both full-fare and upgrade customers.

question

When the movie Jurassic Park debuted in Westwood, California, the price of tickets was $7.50. After several months the ticket price had fallen to $4.00. This is an example of:

answer

None of these

question

Refer to Figure 11.3.2 above. This figure is a representation of:

answer

peak-load pricing, which is different from third-degree price discrimination.

question

Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:

answer

is attempting to convert consumer surplus into producer surplus.

question

The manager of a firm is attempting to practice third degree price discrimination. She has equated the marginal revenue in each of her markets. By doing this, her:

answer

revenues are maximized, given her level of output.

question

answer

-1.5

question

The pricing technique known as tying:

answer

All of these (permits a firm to meter demand, permits a firm to practice price discrimination, enables a firm to extend its monopoly power to new markets

question

A local theater charges $5.00 for every matinee (daytime) ticket, but the ticket prices are much higher during the evening. This is an example of:

answer

peak-load pricing

question

Refer to Figure 11.2.1 above. When the firm charges the reservation price to each consumer, the additional profit equals area:

answer

C+D

question

answer

price descrimination

question

answer

third-degree price discrimination

question

Club Med, which operates a number of vacation resorts, offers vacation packages at a lower price in the winter (i.e., the "off season") than in the summer. This practice is an example of:

answer

Both peak-load pricing and intertemporal price discrimination are correct.

question

answer

Marginal cost increases sharply after the initial marketing stages when the product is sold to the broader market of consumers.

question

A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing:

answer

third-degree price discrimination

question

answer

MRA = MRB = MC.

question

answer

bundling

question

answer

The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.

question

In peak-load pricing,

answer

marginal revenue in the peak period is greater than in the off-peak period.

question

answer

Early buyers have higher reservation prices for the new models, and the manufacturers maximize profits by charging these buyers a higher price.

question

answer

All of these

question

When a firm charges each customer the maximum price that the customer is willing to pay, the firm:

answer

engages in first-degree price discrimination.

question

Suppose a firm has market power and faces a downward sloping demand curve for its product, and its marginal cost curve is upward sloping. If the firm reduces its price, then:

answer

producer surplus increases due to new buyers, but the producer surplus from existing customers declines due to the lower price.

question

answer

two-part tariff.

question

Which of the following statements about setting optimal two-part tariffs for many consumers is NOT true?

answer

The profit from the entrance fee (tariff) is a convex function of the tariff because if first declines and then increases as the tariff increases.

question

When a monopolist engages in perfect price discrimination

answer

the demand curve and the marginal revenue curve are identical.

question

An amusement park charges an entrance fee of $75 per person plus $2.50 per ride. This is an example of:

answer

a two-part tariff.

question

Mixed bundling is more profitable than pure bundling when:

answer

Both the marginal cost of each good being sold is positive and the consumers' reservation values of each good being sold are not perfectly negatively correlated with one or another are correct.

question

You produce stereo components for sale in two markets, foreign and domestic, and the two groups of consumers cannot trade with one another. You will charge the higher price in the market with the:

answer

lower own price elasticity of demand (more inelastic demand).

question

Refer to Figure 11.1.1 above. To capture the consumer surplus along the B range, the firm would ideally charge:

answer

a higher price to consumers willing to pay more and a lower price to those willing to pay less.

question

answer

have sold less output in the local market and more on the internet auction site.

question

Bundling products makes sense for the seller when:

answer

both consumers have heterogeneous demands and firms cannot price discriminate.

question

Refer to Figure 11.3.1 above. The price-discriminating firm earns a higher profit by:

answer

charging a lower price as time goes by.

question

Which of the following is NOT a potential objective of tying strategies used by firms?

answer

Reduce production costs and avoid problems associated with diseconomies of scale.

question

answer

Bundling the two software products is not likely to be profitable because the demands are positively correlated.

question

Refer to Figure 11.5.1 above. The points on the figure represent the reservation prices of four different consumers. With mixed bundling:

answer

consumers A and D pay $90 for a single good, and consumers B and C pay $120 for a bundle.

question

answer

have sold less output in the local market and more on the internet auction site.

question

Which of the following is NOT a potential objective of tying strategies used by firms?

answer

Reduce production costs and avoid problems associated with diseconomies of scale.

question

answer

Bundling the two software products is not likely to be profitable because the demands are positively correlated.

question

answer

none of these

question

answer

Buy only the entree

question

When a company introduces new audio products, it often initially sets the price high and lowers the price about a year later. This is an example of:

answer

intertemporal price discrimination

question

Some grocery stores are now offering customers coupons which entitle them to a discount on certain items on their next visit when they go through the check-out line. This practice is an example of:

answer

third-degree price discrimination

question

When the movie Jurassic Park debuted in Westwood, California, the price of tickets was $7.50. After several months the ticket price had fallen to $4.00. This is an example of:

answer

none of these

question

What is the key characteristic of profit maximizing price discrimination that distinguishes intertemporal price discrimination from peak-load pricing?

answer

Marginal costs are independent across time periods under peak-load pricing.

question

Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:

answer

is attempting to convert consumer surplus into producer surplus.

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order