Econ 3050
Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30 - Q The marginal cost to produce this new drink is $3 (MC = 3) for every firm in this market. 94. Refer to Scenario 3. What price would this new drink sell for if it sold in a competitive market? A. $3 B. $16.50 C. $27 D. 0
A
Reverse auctions A. allow firms to identify customers that have very elastic demand curves. B. require customers to fly at unpopular times. C. Both A and B. D. are used to keep high paying customers from spending too little money.
A
A consumer's reservation price is the A. minimum amount she will pay for a good or service. B. maximum amount she will pay for a good or service. C. amount that maximizes her surplus. D. amount she will pay for a hotel or airline reservation.
B
A firm will exit a competitive market when A. costs force the marginal cost curve to shift to the left. B. the long-run profit would be negative. C. it can earn only earn a zero long-run profit. D. if the current market price is less than its lowest possible AC
B
A local restaurant sells strawberry pie for $3.00 per slice. However, if you order the prime rib dinner, you can get a slice of pie for only a dollar. This is an example of A. a two-part tariff. C. second-degree price discrimination. B. bundling. D. Tie-in
B
Which of the following is an example of mixed bundling? A. dinner at a buffet restaurant B. a desktop computer and monitor combo with each item can be purchased alone C. a suit jacket D. a DSLR camera and a color printer that can be purchased separately
B
What is the primary difference between bundling and tie-ins? A. Bundling is illegal and tie-ins are legal. B. Tie-ins are one-off purchases. C. contractual arrangements D. Bundling is typically a one-off purchase.
D
A merger between a firm and one of its suppliers would be called A. a vertical merger. C. a Cournot merger. B. a horizontal merger. D. an anti-trust violation.
A
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 A. -1.25. C. -0.2. B. -5.0. D. -0.8.
A
A monopoly will not be able to perfectly price discriminate if A. obtaining information about each buyer's reservation price is too costly. B. resale is impossible. C. demand is very inelastic. D. demand is very elastic.
A
A primary difference between rebates and coupons? A. Rebates allow individuals to sort themselves into the high-elasticity group after the sale. B. Neither coupons or rebates are redeemed in high numbers. C. Coupons are legal and rebates are illegal. D. Coupons allow individuals to sort themselves into the high-elasticity group after the sale.
A
A profit maximizing firm selects output such that A. total profit is maximized. C. marginal profit is maximized. B. average profit is maximized. D. marginal cost is minimized.
A
All firms can increase profits using price discrimination. A. false, because some firms are in competitive markets B. true, because market demand curves are downward sloping C. false, because consumers aren't forced to buy a producer's products D. true, because firms can sell different versions of a product that is just right for an individual consumer
A
If the market price is above a firm's average cost at the quantity produced A. the firm operates and makes a profit. B. the market price of the firm's inputs will rise. C. total profit is maximized. D. the firm operates and make zero economic profit
A
In a Bertrand model with identical products A. price is the same as in a competitive market equilibrium. B. price and quantity are the same as in a duopoly. C. price and quantity are the same as in a monopoly. D. None of the above.
A
In a perfectly competitive market A. buyers are price-takers. B. buyers view products from different firms as differentiated. C. firms' demand curves are vertical. D. individual buyers have horizontal demand curves.
A
In the long run, profits will equal zero in a competitive market because of A. free entry and exit. B. the availability of information. C. identical products being produced by all firms. D. constant returns to scale.
A
Long-run market supply curves are downward sloping if A. input prices fall as the industry expands. B. the number of firms is restricted in the long run. C. firms are identical. D. input prices rise as the industry expands
A
Long-run market supply curves are upward sloping in a perfectly competitive market if A. the number of firms is restricted in the long run. B. firms are identical. C. input prices fall as the industry expands. D. firms can freely enter and exit the markets.
A
Producer surplus A. is a measure of what a firm gains from trade. B. is the minimum amount a firm must receive to engage in trade. C. represents the opportunity cost of the firm. D. determines whether or not a firm will produce in the long run.
A
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. Potential consumer surplus equals A. $16. C. $8. B. $4. D. $32.
A
The Organization of Petroleum Exporting Countries (OPEC) is an example of a(n) A. cartel. C. prisoner's dilemma. B. competitive arrangement. D. oil monopoly.
A
The market structure in which there is interdependence among firms is A. oligopoly. C. perfect competition. B. monopolistic competition. D. monopoly.
A
The situation in which a person places greater value on a good as fewer and fewer people possess it is called A. Snob Effect. C. Behavioral Effect. B. Bandwagon Effect. D. Greater Value Effect
A
Which of the following is a current example of a government-granted cartel? A. U.S. professional baseball C. the U.S. automobile industry B. the "Big Three" accounting firms D. the U.S. airline industry
A
Which of the following statements is FALSE? A. Cartels only form among members of an oligopoly. B. Members of a cartel produce less output than that produced in a competitive market. C. Cartel members often have an incentive to cheat. D. A cartel might form if members believe they can increase profits by coordinating activity.
A
With identical firms, constant input prices, and all the other characteristics of a competitive market A. the long run equilibrium price is the minimum of the average cost curve. B. a shift in demand will change the equilibrium price and quantity. C. the long run and short run equilibria are identical. D. a shift in demand will change the equilibrium price but not quantity.
A
What is the value of the Lerner index under perfect competition? A. 1 C. two times the price B. 0 D. infinity
B
A monopolist that chooses price A. necessarily produces less than a monopolist that chooses quantity, hence the laws against price fixing. B. produces the same amount as a monopolist that chooses quantity. C. operates according to the Harvard tradition rather than the Chicago tradition. D. produces more than a monopolist that chooses quantity, thus the irony of laws against price fixing
B
An increase in the cost of an input in the short run will result in A. a leftward shift of the short-run market demand curve. B. a leftward shift of the short-run market supply curve. C. an downward shift of the firm's short-run marginal cost curve. D. a rightward shift in the firm's short-run supply curve
B
Bundling raises higher revenues than selling the goods separately when A. there is a perfect positive correlation between the demands for two goods. B. demands for two products are negatively correlated. C. the goods are complementary in nature. D. demands for two goods are highly positively correlated.
B
Cartels can detect cheating by A. reporting each other to government authorities. B. dividing the market by region so that each cartel member is the only seller in a particular region. C. keeping two sets of accounting books, one for internal use and one for tax purposes. D. All of the above.
B
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 A. first-degree price discrimination. C. third-degree price discrimination. B. actual cost differences. D. second-degree price discrimination.
B
For a perfect-price-discriminating monopoly, the marginal revenue curve A. varies for each consumer. B. is the demand curve. C. is the same as the monopolist's marginal revenue curve. D. lies below the demand curve
B
Group price discrimination has ________ consumer surplus than under ________. A. more; perfect competition C. less; single-price monopoly B. less; perfect competition D. more; an elastic demand curve
B
If a competitive firm cannot earn profit at any level of output during a given short-run period, then which of the following is LEAST likely to occur? A. It will operate at a loss in the short run. B. It will minimize its loss by decreasing output so that price exceeds marginal cost. C. It will shut down in the short run and wait until the price increases sufficiently. D. It will exit the industry in the long run.
B
If a market produces a level of output below the competitive equilibrium, then A. consumer surplus might still be maximized. B. social welfare is not maximized. C. the actual price will be below the equilibrium price. D. social welfare might still be enhanced if a price ceiling keeps price below the competitive price.
B
In a perfectly competitive market A. firms sell a differentiated product. C. transaction costs are high. B. firms can freely enter and exit. D. All of the above.
B
In the Cournot model, if one firm increases its output A. the others will kick it out of the oligopoly. B. the market price drops, reducing the revenues received by the other firms. C. the other firms are unaffected. D. the market will not clear because now there is a surplus.
B
In the Cournot model, if the products are differentiated A. the firms' demand curve shifts to the right and becomes more elastic. B. the firm can shift its demand curve to the right and make it less elastic. C. the firms' demand curve shifts to the left and becomes less elastic. D. None of the above.
B
In the simplest version of the Cournot model, we assume A. the firms set price independently and sequentially. B. that the firms have identical costs. C. the firms are in a Nash equilibrium. D. the firms set price independently and simultaneously
B
Many theme parks charge an entrance fee and a per-ride fee equal to zero. This is an example of A. perfect price discrimination. C. bundling. B. two-part pricing. D. multi-market price discrimination.
B
One criticism of the Bertrand pricing model is that A. the model is implausible when there is product differentiation. B. when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality. C. the model's predicted price is solely a function of demand conditions. D. the model's predicted price is dependent on the number of firms.
B
One reason car dealerships might move away from perfect price discrimination to uniform pricing? A. Uniform pricing is always more profitable and more fair as well. B. Transaction costs erode the profit of perfect price discrimination. C. Consumers are ill-informed and tend to complain too much. D. Perfect price discrimination doesn't work.
B
Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then A. some firms will enjoy long-run profits because they operate at minimum average cost. B. the long-run price will be $0.20 per pound. C. the long-run price will be set just above $0.20 per pound. D. each consumer will purchase $100 worth of potatoes.
B
The Lerner Index is A. a measure of market power. B. the ratio of the difference between price and marginal cost to elasticity of demand. C. equal to (MC - Price)/Price D. equal to (Price - MC)/MC
B
The market demand that is not met by other sellers in a market is known as a firm's A. leftover demand curve. C. excess demand curve. B. residual demand curve. D. market demand curve.
B
The most important factor in determining the long-run profit potential in monopolistic competition is A. the elasticity of the market demand curve. B. free entry and exit. C. the elasticity of the firm's demand curve. D. the reaction of rival firms to a change in price.
B
Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable? A. Cournot Oligopoly C. Cartel B. Bertrand Oligopoly D. All are equally preferable
B
What happens to an incumbent firm's demand curve in monopolistic competition as new firms enter? A. It becomes horizontal. B. It shifts left. C. It shifts right. D. New entrants will not affect an incumbent firm's demand curve.
B
Why doesn't a firm price discriminate based on income levels? A. It is immoral to price discriminate based on income levels. B. It would be nearly impossible to conveniently confirm any individual's income level. C. It is illegal to ask someone their income levels. D. It is common practice for firms to price discriminate based on income.
B
A local theater prices every ticket in the theater at $5.00 for matinees. During the evening, ticket prices are much higher. This is an example of A. second-degree price discrimination. C. peak-load pricing. B. a two-part tariff. D. bundling.
C
A monopoly that is maximizing profits never operates in the ________ portion of the demand curve. A. elastic C. inelastic B. unitary elastic D. horizontal
C
A perfect price discriminating monopoly A. increases market inefficiency. C. captures all consumer surplus. B. creates deadweight loss. D. decreases total welfare.
C
At many municipal golf courses, local residents pay a lower fee to play than other golfers do. One necessary condition for the golf course to be able to successfully price discriminate according to residency is that A. local resident golfers and other golfers have the same price elasticity of demand to play at the municipal course. B. they require all golfers to rent a cart. C. they can check the identification cards of golfers. D. there are many golf courses nearby from which golfers can choose
C
At the current marginal cost of a good produced by a monopoly firm, Al's consumer surplus equals 8 and Ben's consumer surplus equals 15. By using two-part pricing the monopolist could generate a profit of: A. 8. C. 16. B. 15. D. 30
C
Coupons represent a form of price discrimination because they offer a low-cost way for firms to A. perfectly price discriminate. B. retain loyal customers who are not price sensitive. C. identify customers with apparently more elastic demand and offer them a lower price. D. offer discounts to consumers who buy larger quantities.
C
Deadweight loss from monopoly power is expressed on a graph as the area between the A. competitive price line and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets. B. competitive price line and the monopoly price line bounded by zero output and the output chosen by the monopolist. C. average revenue curve and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets. D. competitive price and the average revenue curve bounded by the quantities produced by the competitive and monopoly markets.
C
Firms use various methods for identifying customers such as ________ and ________. A. observable characteristics such as willingness to wait in long lines ; their actions such as early adoption B. the color of their hair; whether or not they roll their eyes at high prices C. observable characteristics such as age; their actions such as willingness to wait in long lines D. None of the above.
C
If AC > p where MR = MC A. firms earn zero profits and new firms will not enter and no existing firms will leave. B. firms earn positive profits and new firms will enter. C. firms earn negative profits and existing firms will leave. D. None of the above.
C
If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then A. consumer surplus is larger than under single-price monopoly. B. social welfare is larger than under perfect competition. C. the monopoly's profits are larger than under single-price monopoly. D. the monopoly's profits are larger than under perfect price discrimination.
C
If all conditions for a perfectly competitive market are met A. firms face sunk cost when entering the market. B. the market demand curve is horizontal. C. firms demand curves are horizontal. D. the firms' demand curves are downward-sloping
C
If firms in a competitive market are not identical, then an increase in cost will A. push the most efficient firms out of the market. B. shift marginal cost to the right. C. push the most inefficient firms out of the market. D. Need more information.
C
If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then A. revenue is lower than variable costs. B. the firm will shut down. C. the firm will operate because its loss is less than if it shut down. D. profit is positive and so the firm will operate
C
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 A. airlines would still charge business flyers a higher fare since the traveler's employer pays anyway. B. airlines would be driven out of business. C. airlines would charge the same price to each type of flyer. D. airlines would counter by charging vacationers a higher fare.
C
If the inverse demand function for a monopoly's product is p = a - bQ, then the firm's marginal revenue function is A. a - (1/2)bQ. C. a - 2bQ. B. a - bQ. D. a.
C
If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will A. set price equal to marginal cost in both markets. B. set price so as to equate the elasticity of demand across markets. C. set a lower price in the market that is more price elastic. D. set a higher price in the market that is more price elastic.
C
If you purchase one pound of apples the price is $1.50 per pound. If you buy a five pound bag of apples, the cost is $5.00. This is most likely an example of A. third degree price discrimination. C. quantity discounts. B. pure bundling. D. two-part pricing
C
In a competitive market, if buyers did not know all the prices charged by the many firms A. firms sell a differentiated product. B. the number of firms will most likely decrease. C. demand curves can be downward sloping for some or all firms. D. all firms still face horizontal demand curves.
C
In comparing the Cournot equilibrium with the competitive equilibrium, A. both profit and output level are higher in the competitive equilibrium. B. both profit and output level are higher in Cournot. C. profit is higher, and output level is lower in Cournot. D. profit is higher, and output level is lower in the competitive equilibrium
C
In the Cournot model A. market price is unaffected by the actions of any individual firm. B. firms' profits are independent. C. firms' profits are interdependent. D. firms do not have to worry about the strategies of the other firms.
C
In the short run A. profit maximizing firms have identical short run supply curves. B. firms will shut down if operating at a loss. C. firms may choose to operate at a loss. D. most firms have short run supply curves that are the same as their long run supply curves
C
In the simplest version of the Cournot model, we assume the firms A. set price independently and simultaneously. B. the firms are in a Nash equilibrium. C. sell identical products. D. set quantities independently and sequentially.
C
Price discrimination A. works because consumers are ignorant about the practice. B. is a way to legally charge a higher price to people you don't like. C. is a type of nonuniform pricing. D. forces producers to make a tradeoff between charging low prices or high prices.
C
Privatization of a state-owned monopoly can A. allow governments to be more efficient. B. reduce bribery of government officials. C. allow governments to capture future producer surplus. D. increases chances of reelection for politicians.
C
Refer to Scenario 3. What is the monopoly price of this new drink? A. $3 B. $27 C. $16.50 D. $13.50
C
Suppose a profit-maximizing monopoly is able to employ group price discrimination. The marginal cost of providing the good is constant and the same in both markets. The marginal revenue the firm earns on the last unit sold in the market with the lower price will be A. less than the marginal revenue the firm earns on the last unit sold in the market with the higher price. B. greater than the marginal cost of the last unit. C. equal to the marginal revenue the firm earns on the last unit sold in the market with the higher price. D. greater than the marginal revenue the firm earns on the last unit sold in the market with the higher price.
C
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. If the firm will charge a monthly access fee plus a per hour rate, the monthly access fee will equal A. $1. C. $16. B. $5. D. $8.
C
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 A. monopolies have the same supply curve as perfectly competitive firms. B. monopolies don't have a demand curve. C. monopolies don't have a supply curve. D. monopolies maximize profit.
C
The market for electricians in a small town might have a different structure than in a large city because A. cartels are legal in large cities but not in small towns. B. unions are stronger in large cities than in small towns. C. the small town market can only support a few electricians. D. None of the above.
C
The monopolist's marginal revenue curve A. doesn't exist. C. lies below the demand curve. B. is identical to the demand curve. D. lies above the demand curve.
C
The monopolist's supply curve A. is identical to the demand curve. B. is the region of its marginal cost curve above average cost. C. doesn't exist. D. is the region of its marginal cost curve that lies above the marginal revenue curve but below the demand curve.
C
The short run is A. when a firm has to decide whether or not to exit. B. usually 3 - 6 months. C. dependent on the characteristics of the industry. D. identical to the long run for most firms
C
The situation in which one firm can produce the total output of the market at lower cost than several firms is called A. cost monopoly. C. natural monopoly. B. pure monopoly. D. ruling monopoly.
C
The use of "introductory prices" suggests A. firms engaged in price gouging. B. firms engaged in anti-competitive behavior. C. firms engaged in multi-period decision making. D. firms engaged in single-period decision making
C
There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price is A. N plus the supply of an individual firm. B. N - 1 times the supply of an individual firm. C. N times the supply of an individual firm. D. It cannot be determined from the information provided.
C
What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be in a perfectly competitive market? A. They value consumer surplus more than producer surplus. B. They seek to avoid future regulation. C. They value producer surplus more than consumer surplus. D. They seek to minimize total surplus.
C
Which factors determine the firm's elasticity of demand? A. number and the proximity of competing firms. B. availability of close substitutes and number of competing firms. C. availability of close substitutes, number of firms, and the proximity among competiting firms. D. availability of close substitutes and the proximity among competiting firms
C
Which of the following is an example of pure bundling? A. an automobile B. a pair of pants C. a pizza and beer lunch combo, which cannot be purchased separately. D. All of the above.
C
A cartel is a group of firms that attempts to A. maximize joint revenue. C. increase consumer surplus. B. behave independently. D. maximize joint profit.
D
A cartel might fail because A. too many firms leave the cartel, causing the cartel price to fall. B. there is an incentive for members to cheat. C. it does not control enough of the output in a market to raise prices enough. D. All of the above.
D
A firm should always shut down if its revenue is A. less than its total costs. C. declining. B. less than its average fixed costs. D. less than its avoidable costs.
D
A merger between two firms that produce identical goods would be called A. a Lerner merger. C. a duopoly. B. a vertical merger. D. a horizontal merger.
D
A monopolistically competitive firm has the free entry characteristics of ________ and the price setting characteristics of ________. A. perfect competition; perfect competition B. an oligopolistic market; perfect competition C. a monopolistic market; a cartel D. perfect competition; a monopoly
D
A monopoly shuts down when A. never, because it can raise its prices as high as necessary to keep operating and maximize profits. B. the average cost is less than price. C. the long run price is below its average variable costs. D. the short run price is below its average variable costs.
D
A patent A. increases total welfare. B. allows the patent owner to capture all of the consumer surplus. C. always gives rise to a monopoly. D. may not provide a barrier to entry
D
A typical firm in a cartel will hold which of the following attitudes? A. If everyone cheats, I'm better off, and so is everyone in the cartel. B. If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat. C. I can never do better for myself than following agreed-upon cartel rules. D. If I alone cheat, I'm better off; if everyone cheats, I'm worse off.
D
Assume government policy increases the demand for corn. A. The producer surplus of corn growers will not change. B. The producer surplus of corn growers will decrease. C. The consumer surplus of corn buyers will increase. D. The producer surplus of corn growers will increase.
D
During a hot summer weekend, the only supermarket near the beach decides to charge consumers $6.50 for the first 12-pack of soda pop, $5.50 for the second and third 12-packs, and $5.25 for all subsequent purchases during the same shopping trip. This would be considered an example of A. uniform monopoly pricing. B. group price discrrimination. C. multi-part pricing. D. an example of declining-block pricing.
D
Excess capacity in monopolistically competitive industries results because in equilibrium A. firms make positive economic profit. B. each firm's output rate is too great to minimize average cost. C. price equals marginal cost. D. each firm's output rate is too small to minimize average cost.
D
Firms, that produce identical products and have identical costs, in a monopolistically competitive market face ________ demand curves and earn ________ economic profits in the long run. A. horizontal; zero C. horizontal; negative B. downward sloping; positive D. downward sloping; zero
D
From society's point of view, a monopolist produces too little because price A. exceeds average cost. C. is less than average cost. B. is less than marginal cost. D. exceeds marginal cost
D
Government actions that create monopolies A. result in lower average costs of production. B. ensure that firms price at marginal cost. C. spur product innovation by the monopoly. D. create deadweight loss.
D
If a specific tax is implemented A. there is less profit per unit sold. B. the firm's average cost curve shifts up, resulting in lower profits. C. the after-tax marginal cost curve shifts, resulting in lower quantity produced. D. All of the above.
D
If the demand for a monopoly's output shifts rightward, the change in quantity produced is A. zero. C. negative. B. positive. D. not predictable.
D
If the price of business broadband is greater than that of residential broadband, all else equal A. both have positive income elasticity. B. business has greater price elasticity than residential. C. generally speaking, broadband is equally priced. D. residential has greater price elasticity than business
D
If, holding the strategies of all other firms constant, no firm can obtain a higher profit by choosing a different strategy, then A. the firms are using the Cournot model. B. the firms are using the Bertrand model. C. the firms must have formed a cartel. D. the firms' strategies are a Nash equilibrium.
D
In a sense, a cartel is self-destructive because A. each cartel member earns economic profit. B. it sets price above marginal cost. C. it reduces consumer surplus. D. each cartel member has the incentive to cheat on the cartel.
D
In the ________, two duopolists compete by simultaneously selecting price. A. Nash model C. monopolistic competition B. Cournot model D. Bertrand model
D
Mergers may result in A. fewer firms in a market. C. anticompetitive behavior. B. more efficient production. D. All of the above.
D
Mergers often increase profit by A. producing economies of scope. C. increasing efficiency of the firm. B. producing economies of scale. D. All of the above.
D
Refer to Scenario Bundling.1. Assuming there is only one customer of each type, what is the total producer surplus from mixed bundling for Konon? A. $120 C. $280 B. $150 D. $350
D
Refer to Scenario Bundling.1. By practice seperate pricing of the camera and printer, which types of customers will buy the printer? A. A, B, C. C. C and D. B. B only D. A, B, D
D
Scenario Bundling.1 : Konon Company produces both digital camera and photo printers. The marginal cost for a digital camera is 120 and the marginal cost for a photo printer is 80. There are four types of customers for Konon's digital camera and photo printers and their reservation prices are given in the table below. Reservation Prices Camera Printer A 200 100 B 150 150 C 210 20 D 50 180 The possible pricing strategies are listed in the table below. Prices Camera Printer Bundle (Camera + Printer) Seperated Prices 140 100 -- Pure Bundling -- -- 230 Mixed Bundling 200 150 300 You can assume each consumer only need to buy 1 camera and 1 printer and they will purchase a product as long as the consumer surplus from purchasing the product is non-negative. 79. Refer to Scenario Bundling.1. What is the reservation price a D type customer would like to pay for a bundle? A. $300 C. $240 B. $200 D. $230
D
The Cournot Model of Oligopoly assumes that A. firms do not cooperate. B. firms make their decisions simultaneously. C. firms decide what quantity to produce. D. All of the above.
D
The more block prices a monopoly can set instead of setting a single price, the A. the more producer surplus. C. the larger the total welfare. B. smaller the deadweight loss. D. All of the above
D
Unlike perfect price discrimination, group price discrimination does not require A. firms to have market power. B. the ability to limit or prevent resale. C. the ability to distinguish between groups with different reservation prices. D. None of the above
D
Which of the following conditions must be true so that a firm can profitably price discriminate? A. The firm must be able to identify how its consumers' demand curves differ. B. The good cannot be easily resold. C. The firm must be able to identify individual or groups of consumers with different demand curves. D. All of the above.
D
Which of the following is an example for group price discrimination? A. a hotel charging more for a room if the customers bring pets B. a BMW selling for more than a VW C. the fact that a razor is cheap and blades are expensive D. local residents receiving a discount at the local golf course
D
Which of the following is true in long run equilibrium for a firm in a monopolistic competitive industry? A. The demand curve is tangent to marginal revenue curve. B. The demand curve is tangent to marginal cost curve. C. The marginal cost curve is tangent to average cost curve. D. The demand curve is tangent to average cost curve.
D
Which statement most nearly describes a Nash equilibrium applied to price competition? A. Each firm automatically moves to the purely competitive equilibrium because it knows the other firm will eventually move to that price anyway. B. One dominant firm sets the price, and the other firms take that price as if it were given by the market. C. Two firms get together and set the price that maximizes joint profits. D. Given the prices chosen by its competitors, no firm has an incentive to change their prices from the equilibrium level.
D
Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"? A. Because they are worried about running out of supply, leaving some of their customers unhappy that they can't buy the good. B. Because they are trying to use scarcity as a way to improve the brand image of the good. C. Because they are worried that they'll run out of the good during the all-important holiday season. D. Because they are limiting the possibility of arbitrage, where consumers buy in a low price area and resell in a higher price area.
D