question
A monopolist facing different demand curves in two separate markets, maximizes profit by
A) setting marginal revenue equal to marginal cost for the combined demand curve and charging the maximum price for that quantity on the combined demand curve.
B) completely ignoring the market with lower demand.
C) completely ignoring the market with higher demand.
D) setting marginal revenue equal to marginal cost and charging the maximum price
that demand will bear in each market.
A) setting marginal revenue equal to marginal cost for the combined demand curve and charging the maximum price for that quantity on the combined demand curve.
B) completely ignoring the market with lower demand.
C) completely ignoring the market with higher demand.
D) setting marginal revenue equal to marginal cost and charging the maximum price
that demand will bear in each market.
answer
D) setting marginal revenue equal to marginal cost and charging the maximum price that demand will bear in each market.
question
Why is it harder to price discriminate with shampoo than with haircuts?
A) Haircuts are harder to resell.
B) There are more substitutes for shampoo.
C) Haircuts are a bundle of goods: location of the salon, quality of the stylist, etc.
D) There is less competition for selling shampoo.
A) Haircuts are harder to resell.
B) There are more substitutes for shampoo.
C) Haircuts are a bundle of goods: location of the salon, quality of the stylist, etc.
D) There is less competition for selling shampoo.
answer
A) Haircuts are harder to resell.
question
Price discrimination is good if output
A) falls under price discrimination.
B) stays the same under price discrimination.
C) increases under price discrimination.
D) is no longer produced under price discrimination.
A) falls under price discrimination.
B) stays the same under price discrimination.
C) increases under price discrimination.
D) is no longer produced under price discrimination.
answer
C) increases under price discrimination.
question
Haircuts for men are often cheaper than haircuts for women, even when they are offered
by the same stylist. Why might this be price discrimination?
A) Everyone has the same demand for haircuts.
B) The marginal cost of supplying a haircut may be lower for male than for female
customers, and haircutting is a competitive industry with price equal to marginal
cost.
C) Stylists are misogynists.
D) Demand for haircuts for women might be more inelastic than demand for haircuts
for men, and haircuts are impossible to arbitrage.
by the same stylist. Why might this be price discrimination?
A) Everyone has the same demand for haircuts.
B) The marginal cost of supplying a haircut may be lower for male than for female
customers, and haircutting is a competitive industry with price equal to marginal
cost.
C) Stylists are misogynists.
D) Demand for haircuts for women might be more inelastic than demand for haircuts
for men, and haircuts are impossible to arbitrage.
answer
D) Demand for haircuts for women might be more inelastic than demand for haircuts
for men, and haircuts are impossible to arbitrage.
for men, and haircuts are impossible to arbitrage.
question
Clark starts a coffee shop and begins hiring employees. The first employee's marginal product of labor (MPL) is $128 an hour and the MPL for each employee beyond the first adds half what the previous employee's ($64 for the second, $32 for the third, $16 for fourth, etc). If the market wage for employees is $10 an hour, how many employees should Clark hire?
A) 3
B) 4
C) 5
D) 6
A) 3
B) 4
C) 5
D) 6
answer
B) 4
question
A crime scene cleaner earns 3 to 4 times more than an office cleaner, even though neither job requires a college degree. This difference in wages
A) occurs because the demand for crime scene cleaners is much higher than the
demand for office cleaners.
B) is evidence of gender based discrimination because most office cleaners are
women.
C) reflects a compensating differential.
D) is a good example of the vagaries of labor markets.
A) occurs because the demand for crime scene cleaners is much higher than the
demand for office cleaners.
B) is evidence of gender based discrimination because most office cleaners are
women.
C) reflects a compensating differential.
D) is a good example of the vagaries of labor markets.
answer
C) reflects a compensating differential.
question
A union can raise wages by
A) increasing the demand for labor.
B) reducing the supply of labor.
C) promoting a smoother labor market.
D) demanding better working conditions.
A) increasing the demand for labor.
B) reducing the supply of labor.
C) promoting a smoother labor market.
D) demanding better working conditions.
answer
B) reducing the supply of labor.
question
Suppose that the ratio of the 90th percentile of income to the 10th percentile of income is 10. What does this mean?
A) Members of the wealthiest decile make at least 10 times more than members of the
poorest decile.
B) Ten percent of the population earns income below the poverty line.
C) The wealthiest decile earns 10 percent of the total income.
D) The distribution of income is 10 percent different from perfect equality.
A) Members of the wealthiest decile make at least 10 times more than members of the
poorest decile.
B) Ten percent of the population earns income below the poverty line.
C) The wealthiest decile earns 10 percent of the total income.
D) The distribution of income is 10 percent different from perfect equality.
answer
A) Members of the wealthiest decile make at least 10 times more than members of the poorest decile
question
The recent concern with The Great Gatsby Curve among researchers on income mobility concerns
A) the realization that F. Scott Fitzgeald's classic relates almost everything that
matters concerning the distribution of income.
B) a consistent and large upward bias in estimates of Gini coefficients for the United
States.
C) a possible connection between the equality of the income distribution and mobility
within the distribution.
D) the observation that tall people tend to be more successful than other people.
A) the realization that F. Scott Fitzgeald's classic relates almost everything that
matters concerning the distribution of income.
B) a consistent and large upward bias in estimates of Gini coefficients for the United
States.
C) a possible connection between the equality of the income distribution and mobility
within the distribution.
D) the observation that tall people tend to be more successful than other people.
answer
C) a possible connection between the equality of the income distribution and mobility within the distribution.
question
Prices in an oligopolistic market are likely to be:
A) equal to that of a monopoly market.
B) lower than that of a monopoly market.
C) equal to that of a competitive market.
D) lower than that of a competitive market.
A) equal to that of a monopoly market.
B) lower than that of a monopoly market.
C) equal to that of a competitive market.
D) lower than that of a competitive market.
answer
B) lower than that of a monopoly market.
question
Two months after Apple introduced the iPhone in 2007, the company reduced the price from $600 to $400. How could this drop of price be an example of price discrimination?
A) Early adopters are less sensitive to price than late adopters.
B) Early adopters have a lower demand than late adopters.
C) Early adopters have a more elastic demand curve than late adopters.
D) Price changes that happen with the passage of time can not be examples of price
discrimination.
A) Early adopters are less sensitive to price than late adopters.
B) Early adopters have a lower demand than late adopters.
C) Early adopters have a more elastic demand curve than late adopters.
D) Price changes that happen with the passage of time can not be examples of price
discrimination.
answer
A) Early adopters are less sensitive to price than late adopters.
question
Economic theory suggests that college graduates receive higher wages than those with
only a high school education because:
A) college graduates tend to unionize.
B) the supply of high school graduates is relatively small compared to the supply of
college graduates.
C) college graduates must be paid higher wages to help them pay off their college
expenses.
D) college graduates are more productive.
only a high school education because:
A) college graduates tend to unionize.
B) the supply of high school graduates is relatively small compared to the supply of
college graduates.
C) college graduates must be paid higher wages to help them pay off their college
expenses.
D) college graduates are more productive.
answer
D) college graduates are more productive
question
If the firms in an oligopoly collude and manage to charge high prices, then these high prices:
A) serve as a barrier to entry, allowing the oligopolists to earn economic profits in the long run.
B) give an incentive for new firms to enter the industry, causing an expansion of industry output and lower prices.
C) discourage consumers for considering substitute products and other ways to economize.
D) All of the answers are correct.
A) serve as a barrier to entry, allowing the oligopolists to earn economic profits in the long run.
B) give an incentive for new firms to enter the industry, causing an expansion of industry output and lower prices.
C) discourage consumers for considering substitute products and other ways to economize.
D) All of the answers are correct.
answer
B) give an incentive for new firms to enter the industry, causing an expansion of industry output and lower prices.
question
Why would firms use the practice of tying?
A) It allows firms to tie goods that are highly valued together with goods that are not
highly valued, hence increasing profits for firms.
B) It is a way to force consumers to buy more than what they would without tying.
C) It is a subtle way to raise prices for those consumers who have a low willingness to
pay.
D) It is a subtle way to charge higher prices to those consumers with a high
willingness to pay, and a lower price to consumers with a low willingness to pay.
A) It allows firms to tie goods that are highly valued together with goods that are not
highly valued, hence increasing profits for firms.
B) It is a way to force consumers to buy more than what they would without tying.
C) It is a subtle way to raise prices for those consumers who have a low willingness to
pay.
D) It is a subtle way to charge higher prices to those consumers with a high
willingness to pay, and a lower price to consumers with a low willingness to pay.
answer
D) It is a subtle way to charge higher prices to those consumers with a high
willingness to pay, and a lower price to consumers with a low willingness to pay.
willingness to pay, and a lower price to consumers with a low willingness to pay.
question
Arbitrage usually makes it ______ for a firm to profitably engage in price discrimination.
A) easier
B) impossible
C) more difficult
D) unnecessary
A) easier
B) impossible
C) more difficult
D) unnecessary
answer
C) more difficult
question
Firms that expect their products to be successful:
A) have more of an incentive to advertise.
B) have less of an incentive to advertise.
C) will only participate in price advertising.
D) can better signal the quality of their product if they do not advertise.
A) have more of an incentive to advertise.
B) have less of an incentive to advertise.
C) will only participate in price advertising.
D) can better signal the quality of their product if they do not advertise.
answer
A) have more of an incentive to advertise.
question
The supply of nurses in country A is the same as the supply in country B, but the nurses in country A earn 90 percent more than the nurses in country B. What can explain this difference?
A) The labor demand curve for nurses in country A is upward sloping.
B) Although the labor supplies are equal across the two countries, the labor supply curve in country A is downward sloping.
C) Country A's economy is more productive than country B's, so the demand for nurses is higher in country A.
D) Country A uses relatively more doctors than nurses to treat patients than country B.
A) The labor demand curve for nurses in country A is upward sloping.
B) Although the labor supplies are equal across the two countries, the labor supply curve in country A is downward sloping.
C) Country A's economy is more productive than country B's, so the demand for nurses is higher in country A.
D) Country A uses relatively more doctors than nurses to treat patients than country B.
answer
C) Country A's economy is more productive than country B's, so the demand for nurses is higher in country A.
question
Which of the following is NOT one of the reasons for differences in earnings between individuals.
A) Differences in productivity
B) Differences in human capital
C) Differences in effort, luck, and ability
D) All of these are reasons for differences in earnings between individuals.
A) Differences in productivity
B) Differences in human capital
C) Differences in effort, luck, and ability
D) All of these are reasons for differences in earnings between individuals.
answer
D) All of these are reasons for differences in earnings between individuals.
question
Bundle pricing makes sense for cable operators because:
A) customers have a high willingness to pay for some channels and a low willingness
to pay for others.
B) customers are more satisfied with more channels being offered.
C) the cost of operation decreases with bundle pricing.
D) the marginal costs of adding additional channels is high.
A) customers have a high willingness to pay for some channels and a low willingness
to pay for others.
B) customers are more satisfied with more channels being offered.
C) the cost of operation decreases with bundle pricing.
D) the marginal costs of adding additional channels is high.
answer
A) customers have a high willingness to pay for some channels and a low willingness
to pay for others.
to pay for others.
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