Managerial Econ-Test 3

question

Marginal Revenue is

the increase in total revenue from selling one more unit of output.

equal to P(1 + 1/e)

equal to P when the price elasticity of demand is infinite.

All of these.

answer

All of these

question

In the long run, firms in markets that are ________ earn zero economic profits.

answer

Both perfectly competitive and monopolistically competitive.

question

Which of the following is a current example of a government-granted cartel?

answer

U.S. professional baseball

question

A patent

answer

may not provide a barrier to entry.

question

Which of the following products benefits from network externalities?

answer

All-electric cars

question

Which of the following conditions can help prolong the life of a cartel?

answer

There are only a few firms in the market, and they all belong to the cartel.

question

If, holding the strategies of all other firms constant, no firm can obtain a higher profit by choosing a different strategy, then

answer

the firms' strategies are a Nash equilibrium.

question

A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the implicit demand elasticity is

answer

-1.25.

question

Stores such as Costco and Sam's Club require an annual membership before you can shop there. This is a form of

answer

two-part pricing.

question

When a firm has a monopoly in a market and also perfectly price discriminates, total welfare

answer

is maximized.

question

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry. Which of the following statements is correct?

answer

The industry would produce more output and charge a lower price after the change.

question

A perfect price discriminating equilibrium maximizes

answer

total welfare.

question

The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, social welfare equals

answer

A + B + C + D + E.

question

Privatization of a state-owned monopoly can

answer

allow governments to capture future monopoly earnings.

question

Firms in a monopolistically competitive market face ________ demand curves and earn ________ economic profits in the long run.

answer

downward-sloping; zero

question

Limited government licenses that create a monopoly do so because

answer

a barrier to enter the market exists.

question

A firm that has market power

answer

can charge a price above marginal cost.

question

Mergers often increase profit by

producing economies of scale.

producing economies of scope.

increasing efficiency of the firm.

All of these.

answer

All of these

question

The situation in which a person places greater value on a good as fewer and fewer people possess it is called the

answer

Snob Effect

question

Which of the following helps a monopoly perfectly price discriminate?

Product demand is known for each consumer.

The product is perishable.

The product is personalizable.

All of these.

answer

All of these

question

The above figure shows the demand and cost curves facing a monopoly. A $100 per unit tax would raise price by

answer

$50.

question

A monopolistically competitive firm has the free entry characteristics of ________ and the price setting characteristics of ________.

answer

perfect competition; a monopoly

question

In the long run, a monopolistic competitor

sets MR = MC.

produces where P = AC.

sets P > MC.

All of these.

answer

all of these

question

Consider a car dealership that advertises a three-year lease at $250 per month. When you arrive to apply, you discover that the lease requires a down payment of $3600 dollars. You will undertake the lease if

answer

you value the lease at least $350 per month.

question

The more inelastic the demand curve, a monopoly will

answer

lose fewer sales as it raises its price.

question

A merger between a firm and one of its suppliers would be called

answer

a vertical merger.

question

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

answer

because the demands for these two goods are independent

question

The Organization of Petroleum Exporting Countries (OPEC) is an example of a(n)

answer

cartel.

question

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will

answer

set a lower price in the market that is more price elastic.

question

Monopolistically competitive firms

answer

have market power because they face downward sloping demand curves.

question

A product can be differentiated through

answer

Both physical changes to the product and marketing.

question

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then profit maximization is achieved when the monopoly sets price equal to

answer

58.

question

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then the deadweight loss from monopoly equals

answer

$441.

question

If AC > p where MR = MC,

answer

firms earn negative profits and existing firms will leave.

question

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

answer

- (All of These)
-The firm must be able to identify individual or groups of consumers with different demand curves.
-The firm must be able to identify how its consumers' demand curves differ.
-The good cannot be easily resold.

question

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

answer

deadweight loss.

question

In a sense, a cartel is self-destructive because

answer

each cartel member has the incentive to cheat on the cartel

question

With two-part pricing

answer

the average price paid varies with the number of units purchased.

question

Relative to a single-price monopoly, the effect of group price discrimination on social welfare is

answer

ambiguous.

question

To buy season tickets at the new Levi's Stadium, 49ers fans have to buy a Personal Seat License (PSL) that then allows them to buy season tickets for the next 30 years. This is an example of

answer

two-part pricing, where the PSL is the lump-sum payment.

question

Mergers are closely scrutinized by the government because

answer

they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly).

question

In the Cournot model, a firm maximizes profit by selecting

answer

its output, assuming that other firms keep their output constant.

question

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market ________, whereas in perfect price discrimination ________.

answer

(All of these)
- all units are sold where p = MC; only the last unit sold is at p = MC
- consumers receive some surplus; producers take all the surplus
- consumers are better off; income is redistributed away from consumers to producers

question

If differentiation makes the market demand curve less elastic, then

answer

price markup over marginal cost is higher than when products are identical.

question

If the inverse demand function for a monopoly's product is p = 100 - 2Q, then the firm's marginal revenue function is

answer

100 - 4Q.

question

In the simplest version of the Cournot model, we assume

answer

(All of These)
- the firms set quantities independently and simultaneously.
- the firms have identical costs and sell identical products.
- there are a small number of firms, and no other firm can enter the market.

question

Resale is difficult when

answer

transaction costs are high.

question

Mergers may result in

answer

(All of These)
-fewer firms in a market.
-more efficient production.
-anticompetitive behavior.

question

A cartel might fail because

answer

(All of these)
-it does not control enough of the output in a market to raise prices enough.
-there is an incentive for members to cheat.
-too many firms leave the cartel, causing the cartel price to fall.

question

A market failure occurs when

answer

there is a non-optimal allocation that leads to an inefficient market.

question

If resale is easy, then

answer

price discrimination won't work, because then only low-priced goods are sold.

question

A photograph processing machine company requiring customers who buy a processing machine to purchase chemicals and photographic paper from it is an example of

answer

a requirement tie-in sale.

question

A monopoly advertises

answer

to raise its profit.

question

A monopolist that chooses price

answer

produces the same amount as a monopolist that chooses quantity

question

Television stations have seemingly synchronized their commercial breaks. This is likely an example of

answer

implicit collusion.

question

A firm practicing group price discrimination across two countries sets MR = common MC and therefore

answer

price will likely be different in each country.

question

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

answer

one.

question

If AC < p where MR = MC,

answer

firms earn positive profits and new firms will enter.

question

If the demand for a monopoly's output shifts rightward, the change in quantity produced is

answer

not predictable.

question

Firms seek to differentiate their product

answer

to strengthen their demand and to make it more inelastic

question

If reservation prices are positively correlated, then

answer

pure bundling cannot increase a firm's profit.

question

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. The profit maximizing two-part tariff results in the firm selling

answer

8 hours.

question

When firms price discriminate, they turn ________ into ________.

answer

consumer surplus; profit

question

If a market is controlled by a perfect-price-discriminating monopoly, then

answer

there is no consumer surplus.

question

For a perfect-price-discriminating monopoly, the marginal revenue curve

answer

is the demand curve.

question

Monopolistically competitive firms face downward sloping residual demand curves because these firms

answer

have relatively few rivals (compared to competition) and/or sell differentiated products.

question

In the simplest version of the Cournot model, we assume the firms

answer

set quantities independently and simultaneously.

question

Which of the following helps a monopoly perfectly price discriminate?

answer

(All of these)
-Product demand is known for each consumer.
-The product is perishable.
-The product is personalizable.

question

If a monopoly's Lerner Index exceeds 1, then

answer

marginal revenue is negative

question

The above figure shows the demand and marginal cost curves for a monopoly. Under monopoly, consumer surplus equals

answer

(None of these)
-a + b.
-a + b + c.
-a + b + c + d + e + f.

question

The above figure shows the demand and marginal cost curves for a monopoly. The deadweight loss of this monopoly equals

answer

c + f.

question

One criticism of the Bertrand pricing model is that

answer

when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality.

question

Which of the following is an example of peak-load pricing?

answer

Charging more for electricity on hot days.

question

All firms can increase profits using price discrimination.

answer

False, because some firms are in competitive markets

question

When firms price discriminate, they

answer

get additional surplus from consumers who would have bought at the profit-maximizing uniform price.

question

Which of the following statements is TRUE?

answer

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

question

If a firm is to capture all consumer surplus with two-part pricing when customers are different,

answer

it must be able to charge different access fees.

question

In a Bertrand model with identical products,

answer

price is equal to marginal cost

question

Assume you have four tickets to a U2 concert. You decide to sell each of them separately on an auction site such as eBay. Your auctions represent

answer

perfect price discrimination amongst those who bid for your tickets.

question

Pizza joints often offer substantially lower prices for pizza picked up at the shop than for delivered pizzas even though they charge a delivery fee. This may be an attempt at

answer

group price discrimination.

question

A typical firm in a cartel will hold which of the following attitudes?

answer

If I alone cheat, I'm better off; if everyone cheats, I'm worse off.

question

Two-sided markets

answer

have two or more user groups that provide each other with network externalities.

question

Why doesn't a firm price discriminate based on income levels?

answer

It would be nearly impossible to conveniently confirm any individual's income level.

question

Unlike perfect price discrimination, group price discrimination does NOT require

answer

(None of these)
-firms to have market power.
-the ability to distinguish between groups with different reservation prices.
-the ability to limit or prevent resale.

question

The market demand that is NOT met by other sellers in a market is known as a firm's

answer

residual demand curve.

question

The above figure shows the reaction functions for two pizza shops in a small isolated town. Collusion would result in

answer

the firms splitting the production of 100 making 50 pizzas each.

question

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then the firm's Lerner Index equals

answer

42/58.

question

The above figure shows the reaction functions for two pizza shops in a small isolated town. Firm B producing 100 pizzas and firm A producing 50 pizzas is NOT a Cournot equilibrium because

answer

firm B is not on its best-response function.

question

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. The profit-maximizing two-part tariff yields total revenue of

answer

$24.

question

Compared to a cartel, firms in a Cournot Oligopoly

answer

make less joint profit.

question

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

answer

(All of these)
-Better technology
-Lower friction due to better organization
-Standardization

question

A monopoly will NOT be able to perfectly price discriminate if

answer

each consumer does not reveal her reservation price./obtaining information about each buyer's reservation price is too costly.

question

An example of a market where a Bertrand model would be NOT be plausible is the market for

answer

toothpicks.

question

Price discrimination

answer

is a type of nonuniform pricing.

question

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

answer

airlines would charge the same price to each type of flyer.

question

The situation where one person's demand for a good depends on the consumption of the good by others is called a

answer

network externality.

question

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that monopolies

answer

don't have a supply curve.

question

Individual price discrimination is used when

answer

firms cannot easily determine consumers' reservation prices.

question

The above figure shows the reaction functions for two pizza shops in a small isolated town. The perfect competitive outcome is that

answer

the firms split the production of 200 pizzas.

question

Disneyland price discriminates because

answer

local residents likely wouldn't go to the park at prices Disneyland can charge for tourists, which would reduce Disneyland's profits.

question

What is the primary difference between bundling and tie-ins?

answer

Bundling is typically a one-off purchase.

question

Minimum efficient scale refers to the lowest level of output at which

answer

average cost is minimized.

question

Consumers who put a high value on a service

answer

are better off under a single-price monopoly.

question

The sales of shoes that include shoelaces is a tie-in sale that most likely

answer

increases efficiency.

question

The above figure shows the reaction functions for two pizza shops in a small isolated town. The Cournot equilibrium is at point

answer

question

A monopoly that is maximizing profits never operates in the ________ portion of the demand curve.

answer

inelastic.

question

Firms use various methods for identifying customers such as ________ and ________.

answer

observable characteristics such as age; their actions such as willingness to wait in long lines

question

Airlines offer lower prices to vacationers than to business travelers because

answer

business travelers are less flexible in their travel plans than vacationers are.

question

Which of the following is an example of bundling?

A pair of pants

A pizza and beer lunch combo

A bicycle

All of these.

answer

all of these

question

Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result

answer

marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market.

question

Firms are better off using rebates rather than just lowering the price of a good because

answer

only those who place a low value on their time or are price sensitive actually redeem the rebate, making profits higher than if they just lowered the price.

question

A firm will increase its spending on advertising until

answer

the marginal benefit of advertising equals the marginal cost of advertising.

question

Without price discrimination, a firm

answer

faces a tradeoff when pricing a good that has customers with different willingness to pay.

question

A perfect price discriminator

answer

charges each buyer her reservation price

question

In monopolistically competitive markets

answer

price is greater than it would be in perfect competition.

price is less than it would be in perfect monopoly.

quantity is greater than it would be in perfect monopoly.

All of these.

question

If the inverse demand curve a monopoly faces is p = 100 - 2Q, then profit maximization

answer

cannot be determined solely from the information provided.

question

The more elastic the demand curve, a monopoly will

answer

lose more sales as it raises its price

question

If the demand for a monopoly's output shifts rightward, the change in quantity produced is NOT predictable because

answer

the monopoly has no supply curve.

question

Peak-load pricing

answer

charges more for a good during periods of high demand.

question

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

answer

actual cost differences.

question

answer

all units are sold where P = MC; only the last unit sold is at P = MC

deadweight loss varies depending on the shape of the MC curve; deadweight loss increases

consumers are better off; producers lose some sales due to high prices.

All of these.

all units are sold where P = MC; only the last unit sold is at P = MC

question

Which of the following average cost functions suggests the presence of a natural monopoly?

answer

AC = 100/Q + 2

question

Which of the following products benefits from network externalities?

answer

Twitter

question

The above figure shows the demand and cost curves facing a monopoly. The deadweight loss of this monopoly is

answer

$1,250.

question

Each member of a cartel

answer

agrees to produce output lower than it would if it were acting independently.

question

The situation in which a person places greater value on a good as more and more people possess it is called the

answer

Bandwagon Effect.

question

A good example of perfect price discrimination is

answer

selling concert tickets to individuals on the street corner

question

In the long run, a monopolistic competitor

answer

sets MR = MC.

produces where P = AC.

sets P > MC.

All of these.

question

What is one way firms can enforce tie-in sales?

One of the goods has no close substitutes.

Through contractual arrangements

Information asymmetry

Any of these.

answer

Any of these.

question

Which of the following is an example for group price discrimination?

answer

Local residents receiving a discount at the local golf course.

question

In the Cournot model, if the products are differentiated,

answer

the firm can shift its demand curve to the right and make it less elastic.

question

The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, producer surplus equals

answer

A + B + C + D + E.

question

All of the following government actions create barriers to entry EXCEPT

answer

requiring a pizza parlor to get a business license.

question

If people posing as vacationers were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

answer

group price discrimination on the part of airlines would no longer be profit maximizing.

1 of 134

question

Marginal Revenue is

the increase in total revenue from selling one more unit of output.

equal to P(1 + 1/e)

equal to P when the price elasticity of demand is infinite.

All of these.

answer

All of these

question

In the long run, firms in markets that are ________ earn zero economic profits.

answer

Both perfectly competitive and monopolistically competitive.

question

Which of the following is a current example of a government-granted cartel?

answer

U.S. professional baseball

question

A patent

answer

may not provide a barrier to entry.

question

Which of the following products benefits from network externalities?

answer

All-electric cars

question

Which of the following conditions can help prolong the life of a cartel?

answer

There are only a few firms in the market, and they all belong to the cartel.

question

If, holding the strategies of all other firms constant, no firm can obtain a higher profit by choosing a different strategy, then

answer

the firms' strategies are a Nash equilibrium.

question

A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the implicit demand elasticity is

answer

-1.25.

question

Stores such as Costco and Sam's Club require an annual membership before you can shop there. This is a form of

answer

two-part pricing.

question

When a firm has a monopoly in a market and also perfectly price discriminates, total welfare

answer

is maximized.

question

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry. Which of the following statements is correct?

answer

The industry would produce more output and charge a lower price after the change.

question

A perfect price discriminating equilibrium maximizes

answer

total welfare.

question

The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, social welfare equals

answer

A + B + C + D + E.

question

Privatization of a state-owned monopoly can

answer

allow governments to capture future monopoly earnings.

question

Firms in a monopolistically competitive market face ________ demand curves and earn ________ economic profits in the long run.

answer

downward-sloping; zero

question

Limited government licenses that create a monopoly do so because

answer

a barrier to enter the market exists.

question

A firm that has market power

answer

can charge a price above marginal cost.

question

Mergers often increase profit by

producing economies of scale.

producing economies of scope.

increasing efficiency of the firm.

All of these.

answer

All of these

question

The situation in which a person places greater value on a good as fewer and fewer people possess it is called the

answer

Snob Effect

question

Which of the following helps a monopoly perfectly price discriminate?

Product demand is known for each consumer.

The product is perishable.

The product is personalizable.

All of these.

answer

All of these

question

The above figure shows the demand and cost curves facing a monopoly. A $100 per unit tax would raise price by

answer

$50.

question

A monopolistically competitive firm has the free entry characteristics of ________ and the price setting characteristics of ________.

answer

perfect competition; a monopoly

question

In the long run, a monopolistic competitor

sets MR = MC.

produces where P = AC.

sets P > MC.

All of these.

answer

all of these

question

answer

you value the lease at least $350 per month.

question

The more inelastic the demand curve, a monopoly will

answer

lose fewer sales as it raises its price.

question

A merger between a firm and one of its suppliers would be called

answer

a vertical merger.

question

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

answer

because the demands for these two goods are independent

question

The Organization of Petroleum Exporting Countries (OPEC) is an example of a(n)

answer

cartel.

question

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will

answer

set a lower price in the market that is more price elastic.

question

Monopolistically competitive firms

answer

have market power because they face downward sloping demand curves.

question

A product can be differentiated through

answer

Both physical changes to the product and marketing.

question

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then profit maximization is achieved when the monopoly sets price equal to

answer

58.

question

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then the deadweight loss from monopoly equals

answer

$441.

question

If AC > p where MR = MC,

answer

firms earn negative profits and existing firms will leave.

question

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

answer

question

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

answer

deadweight loss.

question

In a sense, a cartel is self-destructive because

answer

each cartel member has the incentive to cheat on the cartel

question

With two-part pricing

answer

the average price paid varies with the number of units purchased.

question

Relative to a single-price monopoly, the effect of group price discrimination on social welfare is

answer

ambiguous.

question

To buy season tickets at the new Levi's Stadium, 49ers fans have to buy a Personal Seat License (PSL) that then allows them to buy season tickets for the next 30 years. This is an example of

answer

two-part pricing, where the PSL is the lump-sum payment.

question

Mergers are closely scrutinized by the government because

answer

they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly).

question

In the Cournot model, a firm maximizes profit by selecting

answer

its output, assuming that other firms keep their output constant.

question

answer

question

If differentiation makes the market demand curve less elastic, then

answer

price markup over marginal cost is higher than when products are identical.

question

If the inverse demand function for a monopoly's product is p = 100 - 2Q, then the firm's marginal revenue function is

answer

100 - 4Q.

question

In the simplest version of the Cournot model, we assume

answer

question

Resale is difficult when

answer

transaction costs are high.

question

Mergers may result in

answer

(All of These)
-fewer firms in a market.
-more efficient production.
-anticompetitive behavior.

question

A cartel might fail because

answer

question

A market failure occurs when

answer

there is a non-optimal allocation that leads to an inefficient market.

question

If resale is easy, then

answer

price discrimination won't work, because then only low-priced goods are sold.

question

A photograph processing machine company requiring customers who buy a processing machine to purchase chemicals and photographic paper from it is an example of

answer

a requirement tie-in sale.

question

A monopoly advertises

answer

to raise its profit.

question

A monopolist that chooses price

answer

produces the same amount as a monopolist that chooses quantity

question

Television stations have seemingly synchronized their commercial breaks. This is likely an example of

answer

implicit collusion.

question

A firm practicing group price discrimination across two countries sets MR = common MC and therefore

answer

price will likely be different in each country.

question

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

answer

one.

question

If AC < p where MR = MC,

answer

firms earn positive profits and new firms will enter.

question

If the demand for a monopoly's output shifts rightward, the change in quantity produced is

answer

not predictable.

question

Firms seek to differentiate their product

answer

to strengthen their demand and to make it more inelastic

question

If reservation prices are positively correlated, then

answer

pure bundling cannot increase a firm's profit.

question

answer

8 hours.

question

When firms price discriminate, they turn ________ into ________.

answer

consumer surplus; profit

question

If a market is controlled by a perfect-price-discriminating monopoly, then

answer

there is no consumer surplus.

question

For a perfect-price-discriminating monopoly, the marginal revenue curve

answer

is the demand curve.

question

Monopolistically competitive firms face downward sloping residual demand curves because these firms

answer

have relatively few rivals (compared to competition) and/or sell differentiated products.

question

In the simplest version of the Cournot model, we assume the firms

answer

set quantities independently and simultaneously.

question

Which of the following helps a monopoly perfectly price discriminate?

answer

(All of these)
-Product demand is known for each consumer.
-The product is perishable.
-The product is personalizable.

question

If a monopoly's Lerner Index exceeds 1, then

answer

marginal revenue is negative

question

The above figure shows the demand and marginal cost curves for a monopoly. Under monopoly, consumer surplus equals

answer

(None of these)
-a + b.
-a + b + c.
-a + b + c + d + e + f.

question

The above figure shows the demand and marginal cost curves for a monopoly. The deadweight loss of this monopoly equals

answer

c + f.

question

One criticism of the Bertrand pricing model is that

answer

when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality.

question

Which of the following is an example of peak-load pricing?

answer

Charging more for electricity on hot days.

question

All firms can increase profits using price discrimination.

answer

False, because some firms are in competitive markets

question

When firms price discriminate, they

answer

get additional surplus from consumers who would have bought at the profit-maximizing uniform price.

question

Which of the following statements is TRUE?

answer

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

question

If a firm is to capture all consumer surplus with two-part pricing when customers are different,

answer

it must be able to charge different access fees.

question

In a Bertrand model with identical products,

answer

price is equal to marginal cost

question

Assume you have four tickets to a U2 concert. You decide to sell each of them separately on an auction site such as eBay. Your auctions represent

answer

perfect price discrimination amongst those who bid for your tickets.

question

Pizza joints often offer substantially lower prices for pizza picked up at the shop than for delivered pizzas even though they charge a delivery fee. This may be an attempt at

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group price discrimination.

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A typical firm in a cartel will hold which of the following attitudes?

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If I alone cheat, I'm better off; if everyone cheats, I'm worse off.

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Two-sided markets

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have two or more user groups that provide each other with network externalities.

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Why doesn't a firm price discriminate based on income levels?

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It would be nearly impossible to conveniently confirm any individual's income level.

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Unlike perfect price discrimination, group price discrimination does NOT require

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(None of these)
-firms to have market power.
-the ability to distinguish between groups with different reservation prices.
-the ability to limit or prevent resale.

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The market demand that is NOT met by other sellers in a market is known as a firm's

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residual demand curve.

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The above figure shows the reaction functions for two pizza shops in a small isolated town. Collusion would result in

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the firms splitting the production of 100 making 50 pizzas each.

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If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then the firm's Lerner Index equals

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42/58.

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The above figure shows the reaction functions for two pizza shops in a small isolated town. Firm B producing 100 pizzas and firm A producing 50 pizzas is NOT a Cournot equilibrium because

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firm B is not on its best-response function.

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Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. The profit-maximizing two-part tariff yields total revenue of

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$24.

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Compared to a cartel, firms in a Cournot Oligopoly

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make less joint profit.

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

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(All of these)
-Better technology
-Lower friction due to better organization
-Standardization

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A monopoly will NOT be able to perfectly price discriminate if

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each consumer does not reveal her reservation price./obtaining information about each buyer's reservation price is too costly.

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An example of a market where a Bertrand model would be NOT be plausible is the market for

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toothpicks.

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Price discrimination

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is a type of nonuniform pricing.

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If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

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airlines would charge the same price to each type of flyer.

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The situation where one person's demand for a good depends on the consumption of the good by others is called a

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network externality.

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The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that monopolies

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don't have a supply curve.

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Individual price discrimination is used when

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firms cannot easily determine consumers' reservation prices.

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The above figure shows the reaction functions for two pizza shops in a small isolated town. The perfect competitive outcome is that

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the firms split the production of 200 pizzas.

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Disneyland price discriminates because

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local residents likely wouldn't go to the park at prices Disneyland can charge for tourists, which would reduce Disneyland's profits.

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What is the primary difference between bundling and tie-ins?

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Bundling is typically a one-off purchase.

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Minimum efficient scale refers to the lowest level of output at which

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average cost is minimized.

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Consumers who put a high value on a service

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are better off under a single-price monopoly.

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The sales of shoes that include shoelaces is a tie-in sale that most likely

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increases efficiency.

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The above figure shows the reaction functions for two pizza shops in a small isolated town. The Cournot equilibrium is at point

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A monopoly that is maximizing profits never operates in the ________ portion of the demand curve.

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inelastic.

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Firms use various methods for identifying customers such as ________ and ________.

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observable characteristics such as age; their actions such as willingness to wait in long lines

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Airlines offer lower prices to vacationers than to business travelers because

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business travelers are less flexible in their travel plans than vacationers are.

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Which of the following is an example of bundling?

A pair of pants

A pizza and beer lunch combo

A bicycle

All of these.

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all of these

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Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result

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marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market.

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Firms are better off using rebates rather than just lowering the price of a good because

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only those who place a low value on their time or are price sensitive actually redeem the rebate, making profits higher than if they just lowered the price.

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A firm will increase its spending on advertising until

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the marginal benefit of advertising equals the marginal cost of advertising.

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Without price discrimination, a firm

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faces a tradeoff when pricing a good that has customers with different willingness to pay.

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A perfect price discriminator

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charges each buyer her reservation price

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In monopolistically competitive markets

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price is greater than it would be in perfect competition.

price is less than it would be in perfect monopoly.

quantity is greater than it would be in perfect monopoly.

All of these.

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If the inverse demand curve a monopoly faces is p = 100 - 2Q, then profit maximization

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cannot be determined solely from the information provided.

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The more elastic the demand curve, a monopoly will

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lose more sales as it raises its price

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If the demand for a monopoly's output shifts rightward, the change in quantity produced is NOT predictable because

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the monopoly has no supply curve.

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Peak-load pricing

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charges more for a good during periods of high demand.

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Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

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actual cost differences.

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all units are sold where P = MC; only the last unit sold is at P = MC

deadweight loss varies depending on the shape of the MC curve; deadweight loss increases

consumers are better off; producers lose some sales due to high prices.

All of these.

all units are sold where P = MC; only the last unit sold is at P = MC

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Which of the following average cost functions suggests the presence of a natural monopoly?

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AC = 100/Q + 2

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Which of the following products benefits from network externalities?

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Twitter

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The above figure shows the demand and cost curves facing a monopoly. The deadweight loss of this monopoly is

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$1,250.

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Each member of a cartel

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agrees to produce output lower than it would if it were acting independently.

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The situation in which a person places greater value on a good as more and more people possess it is called the

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Bandwagon Effect.

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A good example of perfect price discrimination is

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selling concert tickets to individuals on the street corner

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In the long run, a monopolistic competitor

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sets MR = MC.

produces where P = AC.

sets P > MC.

All of these.

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What is one way firms can enforce tie-in sales?

One of the goods has no close substitutes.

Through contractual arrangements

Information asymmetry

Any of these.

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Any of these.

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Which of the following is an example for group price discrimination?

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Local residents receiving a discount at the local golf course.

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In the Cournot model, if the products are differentiated,

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the firm can shift its demand curve to the right and make it less elastic.

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The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, producer surplus equals

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A + B + C + D + E.

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All of the following government actions create barriers to entry EXCEPT

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requiring a pizza parlor to get a business license.

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If people posing as vacationers were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

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group price discrimination on the part of airlines would no longer be profit maximizing.

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Managerial Econ-Test 3

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