Chapter 11 - Pricing with Market Power

What is the slop of the indifference curve

-MUX/MUY

How do you find the consumer surplus?

BASE*HIGHT / 2

Economics of Scale

Change in Double the cost results out put more than double

In perfect competition, MR=P but in monopoly...

MR is less than p

In monopoly where is Profit maximization

MR=MC

Monopoly MR

MR=P(1+1/ED)

Which point has the highest marginal productivity of labor? a) Point A b) Point B c) Point C d) Point D (D at the top closer to capital, A at the bottom closer to labor, downward sloping curve)

Point D

5. The bandwagon effect corresponds best to which of the following? A) Snob effect B) External economy C) Negative network externality D) Positive network externality

Positive network externality

1) For the monopolist shown below, the profit maximizing level of output is: a) Q1. b) Q2. c) Q3. d) Q4. e) Q5.

Where MR =MC

2) How much profit will the monopolist whose cost and demand curves are shown below earn at output Q1? a) 0CDQ1 b) 0BEQ1 c) 0AFQ1 d) ACDF e) BCDE

Where MR=MC and then above ATC E

6. Other things equal, expected income can be used as a direct measure of well-being a) always. b) no matter what a person's preference to risk. c) if and only if individuals are not risk-loving. d) if and only if individuals are risk averse. e) if and only if individuals are risk neutral.

if and only if the individuals are risk neutral

1) The slope of an indifference curve reveals: a. that preferences are complete. b. the marginal rate of substitution of one good for another good. c. the ratio of market prices. d. that preferences are transitive. e. none of the above

B

1. Monopolistically competitive firms have monopoly power because they a) face downward sloping demand curves. b) are great in number. c) have freedom of entry. d) are free to advertise.

A

9) Consider Gary's utility function: U(X,Y) = 5 XY, where X and Y are two goods. If the individual consumed 10 units of X and received 250 units of utility, how many units of Y must the individual consume? Would a market basket of X = 15 and Y = 3 be preferred to the above combination? Explain.

Given that U(X,Y) = 5XY = 5(10)Y, then 250 = 50Y, or Y = 5. Since this individual receives 250 units of satisfaction with (X = 10, Y = 5), would (Y = 3 and X = 15) be a preferred combination? At these values, U = 5(15)(3) = 225. So, the first combination would be preferred.

What is the budget line? What is the slope of the budget line?

I=Px*X+PY*y Slope: -PX/PY

6) The ________ elastic a firm's demand curve, the greater its ________. a) less; monopoly power b) less; output c) more; monopoly power d) more; costs

A

6. Which of the following goods may have demand that is potentially affected by the bandwagon effect? A) Satellite radio B) Cellular telephones C) High-definition (HD) televisions D) Electronic book readers E) all of the above

All of the above

10. Why are many oligopolistic market outcomes conveniently described by a Prisoners' Dilemma? a) The firms can always achieve the outcome that maximizes joint outcomes. b) The firms could do better than the Nash equilibrium if they collude. c) The outcome of a Prisoners' Dilemma is always efficient. d) The outcome of a Prisoners' Dilemma is always identical to the perfectly competitive outcome.

B

20. A fast food restaurant currently pays $5 per hour for servers and $50 per hour to rent ovens and other kitchen machinery. The restaurant uses seven hours of server time per unit of machinery time. Determine whether the restaurant is minimizing its cost of production when the ratio of marginal products (capital to labor) is 12. If not, what adjustments are called for to improve the efficiency in resource use?

Find where MRTS (MPK/MPL) is equal to PK/PL

mixed bundling

Mixed bundling allows customers to purchase the goods either together as a bundle or separately. One of the crucial differences between mixed bundling and pure bundling is that some customers purchase only a single item.

16. What form of irrational behavior can cause asset price bubbles? a) People do not based their investment decision on the fundamental value of the asset but only on the belief that the asset price will continue to increase. b) People accidentally buy assets that they did not want, and this drives up the asset price. c) Asset owners panic and begin to sell their assets as quickly as possible. d) People throw darts at a list of stocks and buy whatever the dart lands on without thinking about the reasons.

People do not base their investment decision on the fundamental value of the asset but only on the belief that the asset price will continue to increase.

3. Suppose the aggregate demand for housing in the U.S. includes a substantial speculative component. What happens of the expectations of speculators change, and they believe housing prices will not increase in the future? A) The aggregate demand curve shifts leftward, and the equilibrium market price declines. B) The aggregate demand curve shifts leftward, and the equilibrium market price increases. C) The speculative demand curve shifts leftward, but the aggregate demand curve is unchanged. D) There is no change in the current demand for housing because speculators' expectations are based on future events.

The aggregate demand curve shifts leftward and the equilibrium market price declines

9. Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). What is the marginal product of labor? a) MP = 5 b) MP = 5K c) MP = 5L d) MP = 5K/L

mP=5K

6. The oligopoly model that is most appropriate when one large firm usually takes the lead in setting price is the ________ model. a) Cournot b) Stackelberg c) game theory d) prisoner's dilemma

B

A national chain of bookstores has initiated a frequent buyer program. If you buy a frequent buyer card for $10, you are entitled to a 10 percent discount on all purchases for 1 year. This practice is an example of: A) peak-load pricing. B) intertemporal price discrimination. C) two-part tariff. D) bundling. E) Both A and B are correct.

C

Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game? a) Both firms cut prices. b) Both firms collude. c) There are two Nash equilibria: A cuts and B colludes, and A colludes and B cuts. d) There are no Nash equilibria in this game.

C

Matthew knows his limit. He likes beer up to a point, but if he drinks too much he gets sick.

Downward sloping lines that eventually start to curve up

8) The price of coffee is always equal to one-half the price of tea. When we plot the budget line for coffee and tea, coffee is plotted on the horizontal axis. What is the slope of this budget line? a. -1/2 b. 1/2 c. -2 d. 2

- 1/2

Peter is very picky about his buttered popcorn. He tops every quart of popped corn with exactly one quarter cup of melted butter.

90 degree angles, substitutions

Use the following statements to answer this question. I. To maximize profit, a firm will advertise more when the advertising elasticity is larger. II. To maximize profit, a firm will advertise more when the price elasticity of demand is smaller. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

A

You produce stereo components for sale in two markets, foreign and domestic, and the two groups of consumers cannot trade with one another. You will charge the higher price in the market with the A) lower own price elasticity of demand (more inelastic demand). B) higher own price elasticity of demand (more elastic demand). C) larger teenage population. D) greater consumer incomes.

A

Where is the break even point?

ATC

20. Fine-dining restaurants commonly provide statements in their menus such as, "A 20% gratuity will be added to all checks for parties of six or more patrons." Given that this statement tends to raise the level of tips or gratuities left by other groups of diners, the statement is a good example of: a) the endowment effect. b) loss aversion. c) anchoring. d) none of the above

Anchoring

4. The market structure in which there is interdependence among firms is a) monopolistic competition. b) oligopoly. c) perfect competition. d) monopoly.

B

5. The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. What is the variable cost? a) 200 b) 5Q c) 5 d) 5 + (200/Q) e) none of the above

B

A pricing strategy that requires consumers pay an up-front fee plus an additional fee for each unit of product purchased is a A) tying contract. B) two-part tariff. C) form of perfect price discrimination. D) none of these.

B

Discrimination based upon the quantity consumed is referred to as __________ price discrimination. A) first-degree B) second-degree C) third-degree D) group

B

For most residential telephone service, people pay a monthly fee to have a hookup to the telephone companyʹs line plus a fee for each call actually made. Under this pricing scheme, the telephone company is using A) limit pricing. B) a two-part tariff. C) second-degree price discrimination. D) two stage price discrimination.

B

The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers. The internal price that Acme Oil uses when the crude oil that it extracts is ʺsoldʺ to one of its refineries is called: A) the shadow price. B) the transfer price. C) the market price. D) the non-market price. E) none of the above

B

The maximum price that a consumer is willing to pay for each unit bought is the __________ price. A) market B) reservation C) consumer surplus D) auction E) choke

B

We may be tempted to determine the optimal level of advertising expenditures at the point where the last dollar spent on advertising generates an additional dollar of sales revenue (i.e, the marginal revenue of advertising equals one). In general, this rule will not allow the firm to maximize profits because it ignores the: A) price elasticity of demand. B) marginal cost of additional sales generated by the advertising. C) advertising-to-sales ratio. D) fixed costs of advertising.

B

What is net marginal revenue? A) The same as marginal profit. B) The additional revenue the firm earns from an extra unit of an internally produced intermediate input. C) The additional revenue the firm earns from producing one more unit of output. D) The additional revenue the firm earns from selling one more unit of output.

B

When a monopolist engages in perfect price discrimination, A) the marginal revenue curve lies below the demand curve. B) the demand curve and the marginal revenue curve are identical. C) marginal cost becomes zero. D) the marginal revenue curve becomes horizontal.

B

2nd degree price discrimination

Block Pricing

18) Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct? a) The Japanese firm will sell more steel abroad than they will sell in Japan. b) The Japanese firm will sell more steel in Japan than they will sell abroad. c) The Japanese firm will sell steel at a lower price abroad than they will charge domestic users. d) The Japanese firm will sell steel at a higher price abroad than they will charge domestic users. e) Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.

C

A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing A) first-degree price discrimination. B) second-degree price discrimination. C) third-degree price discrimination. D) fourth-degree price discrimination. E) fifth-degree price discrimination.

C

Bundling raises higher revenues than selling the goods separately when A) demands for two goods are highly positively correlated. B) demands for two products are mildly positively correlated. C) demands for two products are negatively correlated. D) there is a perfect positive correlation between the demands for two goods. E) the goods are complementary in nature.

C

Grocery store chains advertise more than convenience stores because: A) the advertising elasticity of demand is smaller for grocery store chains than for convenience stores. B) convenience stores have more elastic demand for their products than grocery store chains. C) the advertising elasticity of demand for convenience stores is near zero and is much smaller than for grocery store chains. D) all of the above E) none of the above

C

One Guyʹs Pizza advertising expenditures are $1,200 and sales are $30,000. When the advertising expenditure increases to $1,400, pizza sales increase to $32,000. The arc advertising elasticity of demand is approximately __________. A) 0 B) 0.1 C) 0.4 D) 2.5 E) 12.5

C

Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct? A) The Japanese firm will sell more steel abroad than they will sell in Japan. B) The Japanese firm will sell more steel in Japan than they will sell abroad. C) The Japanese firm will sell steel at a lower price abroad than they will charge domestic users. D) The Japanese firm will sell steel at a higher price abroad than they will charge domestic users. E) Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.

C

The local cable TV company charges a ʺhook-upʺ fee of $30 per month. Customers can then watch programs on a ʺpay-per-viewʺ basis (a fee is charged for every program watched). This is an example of A) peak-load pricing. B) second-degree price discrimination. C) a two-part tariff. D) intertemporal price discrimination. E) none of the above

C

The manager of a firm is attempting to practice third degree price discrimination. She has equated the marginal revenue in each of her markets. By doing this her A) profits are maximized. B) costs are minimized given her level of output. C) revenues are maximized given her level of output. D) all of the above

C

Economics of Scope

C(q1

3. The demand curve facing a perfectly competitive firm is a) the same as the market demand curve. b) downward-sloping and less flat than the market demand curve. c) downward-sloping and more flat than the market demand curve. d) perfectly horizontal. e) perfectly vertical.

D

4. Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as a) P = MR. b) P = AVC. c) AR = MR. d) P = MC. e) P = AC.

D

5. In comparing the Cournot equilibrium with the competitive equilibrium, a) both profit and output level are higher in Cournot. b) both profit and output level are higher in the competitive equilibrium. c) profit is higher, and output level is lower in the competitive equilibrium. d) profit is higher, and output level is lower in Cournot.

D

8. The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. What is the average total cost? a) 500 b) 5Q c) 5 d) 5 + (200/Q) e) none of the above

D

Halifax & Smyth (H&S) is a clothier that specializes in expensive men's suits, and the firm makes the suits from wool fabrics that are woven by one of the firm's divisions. This division is not the only source for this material, and H&S could buy or sell wool fabric in the outside competitive market. H&S will buy some of the wool fabric that it needs for suits from the outside market if the: A) market price is less than the optimal transfer price if the outside market did not exist. B) market price is less than the point where the net marginal revenue of weaving wool fabric intersects the marginal cost of wool fabric. C) market price is less than the point where the net marginal revenue of assembling menʹs suits intersects the marginal cost of assembly. D) Both A and B are correct.

D

monopolistically competitive firm in short-run equilibrium: a) will make negative profit (lose money). b) will make zero profit (break-even). c) will make positive profit. d) Any of the above are possible.

D

Diseconomics of scale

Double the cost results of output less than double

1. Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the: a) price-taking assumption. b) homogeneous product assumption. c) free entry assumption. d) A and B are correct. e) A and C are correct.

E

Bindy, an 18-year-old high school graduate, and Luciana, a 40-year-old college graduate, just purchased identical hot new sports cars. Acme Insurance charges a higher rate to insure Bindy than Luciana. This practice is an example of: A) collusion. B) price discrimination. C) two-part tariff. D) bundling. E) none of the above

E

The price of on-campus parking from 8:00 AM to 5:00 PM, Monday through Friday, is $3.00. From 5:00 PM to 10:00 PM, Monday through Friday, the price is $1.00. At all other times parking is free. This is an example of A) bundling. B) second-degree price discrimination. C) a two-part tariff. D) tying. E) none of the above

E

When the movie ʺJurassic Parkʺ debuted in Westwood, California, the price of tickets was $7.50. After several months the ticket price had fallen to $4.00. This is an example of A) peak-load pricing. B) second-degree price discrimination. C) a two-part tariff. D) tying. E) none of the above

E

3rd degree price discrimination

Higher purchasing power you have the more you pay per unit. A seller can practice third degree price discrimination by segmenting their market into groups that are willing to pay different prices for similar or the same good. Charging different prices based up on gender (clothing) or age (tickets for many goods, meals for the elderly, etc.) can capture more consumer surplus.

For perfectly competitive firms, what is the relationship among market price (P), average revenue (AR), and marginal revenue (MR)?

P=AR=MR

What are the sources of Monopoly

Patents Copy rights licenses complete control of resources

1st degree price discrimination

Practice of charging each customer her reservation price

2. Suppose that the demand for artichokes (Qa) is given as: Qa = 200 - 4P. Suppose that the price of artichokes is increased slightly from $10. The total expenditure by consumers on artichokes will ________ and the number of artichokes sold will ________. A) rise, rise B) rise, fall C) fall, rise D) fall, fall

Rise, Fall

If u(EI) is greater than EU then what

Risk Averse

________ Ann does not care whether she has more diet soft drinks or fewer diet soft drinks.

Straight horizontal lines

5. When labor usage is at 12 units, output is 36 units. From this we may infer that a) the marginal product of labor is 3. b) the total product of labor is 1/3. c) the average product of labor is 3. d) none of the above

The average product of labor is 3

19. The tendency for individuals to assign higher values to goods when they own the goods than when they do not possess the goods is known as the: a) substitution effect. b) endowment effect. c) income effect. d) anchoring effect.

The endowment effect

6. According to the law of diminishing returns a) the total product of an input will eventually be negative. b) the total product of an input will eventually decline. c) the marginal product of an input will eventually be negative. d) the marginal product of an input will eventually decline. e) none of the above

The marginal product of an input will eventually decline

Figure 1: Alvin's preferences for good X and good Y are shown in the diagram below. (Direct lines sloping parallel slopping down) 2) Based on Figure 1, it can be inferred that: a. Alvin does not consider good X as "good." b. Alvin will never purchase any of good Y. c. Alvin regards good X and good Y as perfect substitutes. d. Alvin regards good X and good Y as perfect complements. e. none of the above 3) Refer to Figure 1, which of the following is true concerning Alvin's marginal rate of substitution? a. It is diminishing. b. It is positive but varies along the indifference curve. c. It is constant. d. It is zero.

They are perfect substitutes and they are constant

The MRTS is equal to the slope of isoquants.

WHICHI S MRTS, L,K = - DK/DL

Oligopoly

a few firms compete with one another and entry of new firms is impeaded. looking at everyones competition.

Lerner Index

a measure of a firm's markup, or its level of market power P-MC/P

At what point are profits positive or negative?

above ATC, positive

7) Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will: a. become flatter. b. become steeper. c. shift outward. d. become steeper or flatter depending on the relationship between prices and income.

become flatter

Amy likes M&M's, plain and peanut. For Amy, the marginal rate of substitution between plain and peanut M&M's does not vary with the quantities of plain and peanut M&M's she consumes.

constant downward sloping lines

Nash Equilibrium

each firm is doing the best it can given what its competition is doing. Set of strategies or actions in which each firm does the best it can given their competitions actionsMixed bundling allows customers to purchase the goods either together as a bundle or separately. One of the crucial differences between mixed bundling and pure bundling is that some customers purchase only a single item.

Monopolistic

large # of firms but not infinite. Markets can enter freely, producing its own brand or version of different kinds of products

How to calculate the Variance

probability * ( payoff-expected pay off)

13. The law of large numbers: a) can be used to explain why some people are risk averse and others are risk neutral or risk loving. b) can be used to explain why some people choose to self-insure against random, single and largely unpredictable events. c) states that large amounts of information are often preferred to small amounts of information. d) states that the average outcome of a large number of similar events can often be predicted

states that the average outcome of a large number of similar events can often be predicted

What is the formula for the utility you recieve for buying 1 unit of x every dollar you spend you recieve

=MUX/PX = MUY/PY

7) What is the value of the Lerner index under perfect competition? a) 1 b) 0 c) infinity d) two times the price

B

7. The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. What is the marginal cost? a) 200 b) 5Q c) 5 d) 5 + (200/Q) e) none of the above

C

2. A firm maximizes profit by operating at the level of output where a) average revenue equals average cost. b) average revenue equals average variable cost. c) total costs are minimized. d) marginal revenue equals marginal cost. e) marginal revenue exceeds marginal cost by the greatest amount.

D

5. Refer to Figure 1. The profit-maximizing output is a) 30. b) 54. c) 60. d) 67. e) 79.

First you need to know the price, P=MC=Profit Maximization D

7. Due to the bandwagon effect, demand for some products is ________ elastic than it would be without the positive network externality. A) more B) less C) equally D) more strongly unitary

More

What is the cost minimzation rule

The decision rule for minimizing cost is to choose inputs so that MPL/PL = MPK/PK. MPL/PL, labor's marginal product divided by it's price, is the extra output due to spending another dollar on labor. Costs are minimized when the marginal product per dollar spent on all inputs is the same.

To maximize utility you must find what

To maximize utility, Sally must find the point where, MRS ( MUx/MUy) is equal = to Px/Py

1. Recently, Skooterville has experienced a large growth in population. As a result, the demand curve for telephone service in Skooterville: A) has shifted to the right. B) has shifted to the left. C) has shifted down. D) Both B and C are correct. E) none of the above

has shifted to the right

For a two-part tariff imposed on two consumers, the entry fee is based on the: A) consumer surplus of the customer with lower willingness-to-pay. B) consumer surplus of the customer with higher willingness-to-pay. C) simple average of the consumer surplus for the two buyers. D) none of the above

A

intertemporal price discrimination

As the name might imply, inter-temporal price discrimination involves charging different prices at different times for things. This could apply to travel (last minute costs more), clothing (wait for sales), and other goods.

A 10 percent decrease in advertising results in a 5 percent sales decrease. The advertising elasticity of demand is __________. A) -2.0 B) -0.5 C) 0.5 D) 2 E) none of the above

C

6. The burden of a tax per unit of output will fall heavily on consumers when demand is relatively ________ and supply is relatively ________.

a

10. If a factory has a short-run capacity constraint (e.g., an auto plant can only produce 800 cars per day at maximum capacity), the marginal cost of production becomes ________ at the capacity constraint. a) infinite b) zero c) highly elastic

A

11. Which of the following is NOT an expression for the cost minimizing combination of inputs? a) MRTS = MPL /MPK b) MPL/w = MPK/r c) MRTS = w/r d) MPL/MPK = w/r

A

15. Suppose MRTS = K/(4L) with capital (K) on the vertical axis of the isoquant map. Suppose L=100 hours and K=400 machine hours at the current level of output. How much additional labor is required to maintain output if we reduce capital by one machine hour? a) One hour b) Two hours c) Three hours d) Four hours

A

As long as price is greater than or equal to BLANK then no shut down. At least making BLANK costs do not shut down

Average Variable Cost, Variable costs

7. Assume that average product for six workers is fifteen. If the marginal product of the seventh worker is eighteen, a) marginal product is rising. b) marginal product is falling. c) average product is rising. d) average product is falling.

Average product is rising

3. Which of the following statements demonstrates an understanding of the importance of sunk costs for decision making? I. "Even though I hate my MBA classes, I can't quit because I've spent so much money on tuition." II. "To break into the market for soap our firm needs to spend $10M on creating an image that is unique to our new product. When deciding whether to develop the new soap, we need to take this marketing cost into account." a) I only b) II only c) Both I and II d) Neither I nor II

B

4. We manufacturer automobiles given the production function q = 5KL where q is the number of autos assembled per eight-hour shift, K is the number of robots used on the assembly line (capital) and L is the number of workers hired per hour (labor). If we use K=10 robots and L=10 workers in order to produce q = 450 autos per shift, then we know that production is: a) technologically efficient. b) technologically inefficient. c) maximized. d) optimal.

B

7. Which oligopoly model(s) have the same results as the competitive model? a) Cournot b) Bertrand c) Stackelberg d) Both Cournot and Stackelberg

B

A firm setting a two-part tariff with only one customer should set the entry fee equal to A) marginal cost. B) consumer surplus. C) marginal revenue. D) price.

B

An amusement park charges an entrance fee of $75 per person plus $2.50 per ride. This is an example of A) first-degree price discrimination. B) a two-part tariff. C) second-degree price discrimination. D) bundling. E) tying.

B

11. The shutdown decision can be restated in terms of producer surplus by saying that a firm should produce in the short run as long as a) revenue exceeds producer surplus. b) producer surplus is positive. c) producer surplus exceeds fixed cost. d) producer surplus exceeds variable cost. e) profit and producer surplus are equal.

B As long as p * q > AV * q

10) Suppose Orange Inc. sells MP3 players and initially has monopoly power because there are only a few close substitutes available to consumers. As more types of MP3 players are introduced into the market, the demand facing Orange becomes ________ elastic and the Lerner index achieved by the firm in this market ________. a) less, declines b) less, increases c) more, declines d) more, increases

C

4. Consider the following statements when answering this question. I. Increases in the rate of income tax decrease the opportunity cost of attending college. II. The introduction of distance learning, which enables students to watch lectures at home, decreases the opportunity cost of attending college. a) I is true, and II is false. b) I is false, and II is true. c) I and II are both true. d) I and II are both false.

C

8. Relative to the Nash equilibrium in the Cournot model, the Nash equilibrium in the Bertrand model with homogeneous products a) results in the same output but a higher price. b) results in the same output but a lower price. c) results in a larger output at a lower price. d) results in a smaller output at a higher price. e) any of the above may result.

C

What is the profit maximizing condition for a vertically integrated firm? A) Net marginal revenue equals the sum of the marginal costs of the intermediate inputs. B) Marginal revenue equals the marginal cost of the final output. C) Net marginal revenue equals the marginal cost of each intermediate good. D) The sum of net marginal revenues equals the marginal cost of the final output.

C

When a company introduces new audio products, it often initially sets the price high and lowers the price about a year later. This is an example of A) a two-part tariff. B) second-degree price discrimination. C) intertemporal price discrimination. D) first-degree price discrimination.

C

Natalya likes rap and rock music. Natalya's preferences exhibit a diminishing marginal rate of substitution between the two types of music.

Downward curving slope lines

Albatross Software has two main products: WindSong is a program that can be used to edit audio files and SunBurst is a program that can be used to edit digital photos. The two major types of customers are small businesses and home users. The small business customers have a reservation price of $300 for WindSong and $450 for SunBurst. The home users have a reservation price of $100 for WindSong and $125 for SunBurst. Which of the following statements is true? A) Bundling the two software products is not likely to be profitable because the marginal cost of producing software is positive by very small. B) Bundling the two software products is not likely to be profitable because the consumer demands are homogeneous. C) Bundling the two software products is likely to be profitable because the demands are negatively correlated. D) Bundling the two software products is not likely to be profitable because the demands are positively correlated.

D

Third-degree price discrimination involves A) charging each consumer the same two-part tariff. B) charging lower prices the greater the quantity purchased. C) the use of increasing block rate pricing. D) charging different prices to different groups based upon differences in elasticity of demand.

D

Figure 2: Alvin's preferences for good X and good Y are shown in the diagram below. (Graph showing constant right angles) 4) Based on Figure 2, it can be inferred that: a. Alvin does not consider good X as "good." b. Alvin will never purchase any of good Y. c. Alvin regards good X and good Y as perfect substitutes. d. Alvin regards good X and good Y as perfect complements. e. none of the above 5) Refer to Figure 2. At any consumption bundle with the quantity of good X exceeding the quantity of good Y (that is, a bundle located below the 45 degree line, like point A), Alvin's marginal rate of substitution of good X for good Y is a. diminishing. b. positive. c. constant and positive. d. zero.

Perfect Compliments, Zero

10) Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3 ∙ XY2. The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500. a. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. b. Determine the X, Y combination which maximizes Sally's utility, given her budget constraint. Show her optimum point on a graph. (Partial units for the quantities are possible.) (Note: MUY = 6XY and MUX = 3Y2.)

To maximize utility, Sally must find the point where, MRS ( ) is equal to . MRS = = = = 2 Set MRS = , = 2, Y = 4X Sally should consume four times as much Y as X. To determine exact quantities, substitute Y = 4X into I = PXX + PYY 500 = 10X + 5Y 500 = 10X + 5(4X) 500 = 30X X = 16.67 Y = 4(16.67) Y = 66.67

14. A straight-line isoquant a) is impossible. b) would indicate that the firm could switch from one output to another costlessly. c) would indicate that the firm could not switch from one output to another. d) would indicate that capital and labor cannot be substituted for each other in production. e) would indicate that capital and labor are perfect substitutes in production.

Would indicate that capital and labor are perfect substitutes in production

23. Suppose your instructor gave hats with your school's logo to half of your economics classmates. She then asked these students to value the hats, and the average response was $9 per hat. Under the endowment effect, we should expect that the average value assigned by the economics students who did NOT receive the hats to be: a) higher. b) lower. c) the same. d) We cannot answer this question without knowing more about the risk preferences.

lower

Cartel

market in which some or all firms explicity collude coordinating prices and output levels to maximize joint profits

8. Some luxury product manufacturers will purposefully raise prices on their goods in order to reduce sales volume. This strategy may successfully increase sales revenue if the luxury goods are subject to the ________ effect and have relatively ________ demand. A) bandwagon, elastic B) bandwagon, inelastic C) snob, elastic D) snob, inelastic

snob, inelastic

4. When negative network externalities are present A) the demand curve is more elastic than otherwise. B) the demand curve is less elastic than otherwise. C) the demand curve shifts to the right. D) the demand curve shifts to the left.

the demand curve is less elastic than otherwise

18. What is a reference point? a) the value of a good on the black market b) the point from which an individual makes a consumption decision c) a subjective valuation of a good d) the minimum price that an individual would sell a good that she currently owns e) none of the above

the point from which an individual makes a consumption decision

12. The object of diversification is a) to reduce risk and fluctuations in income. b) to reduce risk, but not to reduce fluctuations in income. c) to reduce fluctuations in income, but not to reduce risk. d) neither to reduce risk, nor to reduce fluctuations in income.

to reduce risk and fluctuations of income

George dislikes broccoli and would be willing to pay something to not have to eat it.

upward curving slope lines

A local theater charges $5.00 for every matinee (daytime) ticket, but the ticket prices are much higher during the evening. This is an example of A) peak-load pricing. B) second-degree price discrimination. C) a two-part tariff. D) bundling. E) none of the above

A

Bundling is effective when the demands for the bundled products are __________ and __________ correlated. A) different; negatively B) different; positively C) similar; negatively D) similar; positively E) identical; perfectly

A

5. When the government imposes a specific tax per unit on a product, changes in consumer surplus are ________ and changes in producer surplus are ________. a) negative; positive b) positive; positive c) negative; negative d) positive; negative

A

6. The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. What is the fixed cost? a) 200 b) 5Q c) 5 d) 5 + (200/Q) e) none of the above

A

9) Assume that a firm's marginal cost is $10 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately a) $20. b) $5. c) $10. d) The answer cannot be determined without additional information.

A

A firm is charging a different price for each unit purchased by a consumer. This is called A) first-degree price discrimination. B) second-degree price discrimination. C) third-degree price discrimination. D) fourth-degree price discrimination. E) fifth-degree price discrimination.

A

A local restaurant offers ʺearly birdʺ price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of A) peak-load pricing. B) second-degree price discrimination. C) a two-part tariff. D) tying. E) none of the above

A

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) bundling. B) second-degree price discrimination. C) a two-part tariff. D) tying. E) none of the above

A

Halifax & Smyth (H&S) is a clothier that specializes in expensive men's suits, and the firm makes the suits from wool fabrics that are woven by one of the firm's divisions. This division is the only source for this material, and H&S uses the optimal transfer price to determine the value of the wool fabric. What happens if the marginal cost of assembling the men's suits increases? A) The net marginal revenue (NMR) curve for wool fabric shifts upward, and wool (suit) production increases. B) The net marginal revenue (NMR) curve for wool fabric shifts upward, and wool (suit) production decreases. C) The net marginal revenue (NMR) curve for wool fabric shifts downward, and wool (suit) production increases. D) The net marginal revenue (NMR) curve for wool fabric shifts downward, and wool (suit) production decreases.

A

The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers. There are many other firms that extract and sell crude oil so that the market for crude oil is regarded by Acme Oil as competitive. The internal price that Acme Oil uses when the crude oil that it extracts is ʺsoldʺ to one of its refineries: A) equals the market price for crude oil. B) equals the market price for crude oil less a discount because Acme Oil does not to profit from itself. C) is unrelated to the market price of crude oil. D) is greater than the marginal cost of extracting crude oil.

A

The maximum price that a consumer is willing to pay for a good is called: A) the reservation price. B) the market price. C) the first-degree price. D) the block price. E) the choke price.

A

24. Which of the following is an example of anchoring in retail prices? a) Price tags on the merchandise list a "high" price that is charged at a competing retailer and a much lower price that the store actually charges. b) An appliance store lists a commercial-quality coffee maker that has high capacity and is very expensive, and all of the other coffee makers are smaller and less expensive. c) Restaurant menus include a premium entree like a steak and lobster dinner that is very expensive, and all of the other entree choices are priced at lower values. d) all of the above

All of the above

8. You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers that you employ per hour. As you increased the number of employees hired per hour from three to five, your total output increased by 5 cars to 15 cars per hour. What is the average product of labor at the new levels of labor? a) AP = 3 cars per worker b) AP = 5 cars per worker c) AP = 4 cars per worker d) We do not have enough information to answer this question.

AP = 3 Cars per worker

3. Suppose there are ten identical manufacturing firms that produce computer chips with machinery (capital, K) and labor (L), and each firm has a production function of the form q = 10KL0.5. What is the industry-level production function? a) Q = 10K10L5 b) Q = 100KL0.5 c) Q = 100L0.5 d) none of the above

B

21. Some high-end retail stores that distribute mail-order catalogs will prominently offer some very high priced goods for sale (for example, a luxury sports car with gold-plated interior trim) in addition to their regular line of merchandise. Behavioral economists argue that the stores do not really plan to sell these goods, but they use these items to provide the customers with a high reference point for the prices of the other goods in the catalog. This practice is an example of: a) the ultimatim game. b) loss aversion. c) anchoring. d) none of the above

Anchoring

12. Suppose that the price of labor (PL) is $10 and the price of capital (PK) is $20. What is the equation of the isocost line corresponding to a total cost of $100? a) PL + 20PK b) 100 = 10L + 20K c) 100 = 30(L+K) d) 100 + 30 (PL + PK) e) none of the above

B

16. Use the following statements to answer this question: I. The long-run average cost (LAC) curve is the envelope of the short-run average cost (SAC) curves. II. The long-run marginal cost (LMC) curve is the envelope of the short-run marginal cost (SMC) curves. a) I and II are true. b) I is true and II is false. c) II is true and I is false. d) I and II are false.

B

18. Joe's Organic Cereal Company produces granola breakfast cereal under a fixed proportion production system in which 22 ounces of cereal are packaged in each cardboard box. However, the plant production manager decides to reduce the amount of cereal per box to 20.5 ounces at the start of the next year. For the isoquant map, cereal is plotted in the vertical axis, and boxes are on the horizontal axis. What happens to the curves in the isoquant map as a result of this change? a) Shift upward b) Shift downward c) Shift rightward d) Shift leftward

B

21) Which of the following statements is NOT compatible with explanations for why peak-load pricing is more profitable than charging a single price? a) Consumer willingness to pay for the product varies a lot across different time periods. b) Marginal cost of production is much higher under peak demand. c) Marginal revenue changes a lot across different time periods. d) Marginal revenue must be the same across different time periods.

B

3) Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the a) firm is maximizing profit. b) firm's output is smaller than the profit maximizing quantity. c) firm's output is larger than the profit maximizing quantity. d) firm's output does not maximize profit, but we cannot conclude whether the output is too large or too small.

B

3. A monopolistically competitive firm in long-run equilibrium: a) will make negative profit. b) will make zero profit. c) will make positive profit. d) Any of the above are possible.

B

8) The more elastic the demand facing a firm, a) the higher the value of the Lerner index. b) the lower the value of the Lerner index. c) the less monopoly power it has. d) the higher its profit.

B

A firm has two customers and creates a two-part tariff with a usage fee (P) that exceeds the marginal cost of production and leaves each customer with positive consumer surplus such that CS2 > CS1 > 0. If the firm sets the entry fee equal to CS2, then the number of customers that actually buy the product is equal to: A) zero. B) one. C) two. D) We donʹt have enough information to answer this question.

B

An electric power company uses block pricing for electricity sales. Block pricing is an example of A) first-degree price discrimination. B) second-degree price discrimination. C) third-degree price discrimination. D) Block pricing is not a type of price discrimination.

B

Automobile manufacturers commonly sell new car models at the full suggested retail price during the first few years the car is on the market, and they do not offer rebates or discounts. After the initial sales period, the manufacturers typically offer rebates or discounts on these models. The marginal cost of manufacturing the cars is constant across time. Which of the following statements is true? A) The firms practice peak-load pricing by charging a higher price in the initial sales period. B) Early buyers have higher reservation prices for the new models, and the manufacturers maximize profits by charging these buyers a higher price. C) The marginal revenue from buyers who purchase these cars after the initial sales period must be lower that the marginal revenue from early buyers. D) To maximize profits, the firms equate the buyersʹ reservation prices across time.

B

In 1994, the Walt Disney Corporation ran a special promotion on tickets to Disneyland. Residents of southern California who lived near the amusement park were offered admission at the special price of $22. Other visitors to Disneyland were charged about $30. This practice is an example of: A) collusion. B) price discrimination. C) two-part tariff. D) bundling. E) tying.

B

In peak-load pricing, A) marginal revenue is equal in both periods. B) marginal revenue in the peak period is greater than in the off-peak period. C) marginal revenue in the peak period is less than in the off-peak period. D) the sum of the marginal revenues is greater than the sum of the marginal costs.

B

McDonaldʹs restaurant located near the high school offered a Tuesday special for high school students. If high school students showed their student ID cards, they would be given 50 cents off any medium combination meal. This practice is an example of: A) collusion. B) price discrimination. C) two-part tariff. D) bundling. E) tying.

B

Second-degree price discrimination is the practice of charging A) the reservation price to each customer. B) different prices for different quantity blocks of the same good or service. C) different groups of customers different prices for the same products. D) each customer the maximum price that he or she is willing to pay.

B

Some grocery stores are now offering customers coupons which entitle them to a discount on certain items on their next visit when they go through the check-out line. This practice is an example of: A) intertemporal price discrimination. B) third-degree price discrimination. C) a two-part tariff. D) bundling. E) none of the above

B

Suppose we advertise up to the point where the last dollar spent on advertising generates an additional dollar of sales revenue (i.e, the marginal revenue of advertising equals one). If the full marginal cost of advertising is greater than one, then we will generate: A) less output than the profit maximizing level. B) more output than the profit maximizing level. C) the profit maximizing level of output. D) We donʹt have enough information to answer this question.

B

12. Consider the following statements when answering this question I. If the cost of producing each unit of output falls $5, then the short-run market price falls $5. II. If the cost of producing each unit of output falls $5, then the long-run market price falls $5. a) I and II are true. b) I is true, and II is false. c) I is false, and II is true. d) I and II are false.

C

A doctor charges two different prices for medical services, and the price level depends on the patientsʹ income such that wealthy patients are charged more than poorer ones. This pricing scheme represents a form of A) first-degree price discrimination. B) second-degree price discrimination. C) third-degree price discrimination. D) pricing at each consumerʹs reservation price.

C

A firm sells an identical product to two groups of consumers, A and B. The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximize profits. Which of the following best describes the price and output strategy that will maximize profits? A) PA = PB = MC. B) MRA = MRB. C) MRA=MRB=MC. D)(MRA-MRB)=(1-MC).

C

A third-degree price discriminating monopolist can sell its output either in the local market or on an internet auction site (or both). After selling all of its output, the firm discovers that the marginal revenue earned in the local market was $20 while its marginal revenue on the internet auction site was $30. To maximize profits the firm should A) have sold more output in the local market and less at the internet auction site. B) do nothing until it acquires more information on costs. C) have sold less output in the local market and more on the internet auction site. D) sell less in both markets until marginal revenue is zero. E) sell more in both markets until marginal cost is zero.

C

For a perfect first-degree price discriminator, incremental revenue is A) greater than price if the demand curve is downward sloping. B) the same as the marginal revenue curve if the firm is a non-discriminating monopolist. C) equal to the price paid for each unit of output. D) less than the marginal revenue for a non-discriminating monopolist.

C

Many cellular phone rate plans are structured as a combination of __________ price discrimination. A) first-degree and second-degree B) first-degree and third-degree C) second-degree and third-degree D) peak-load pricing and third-degree

C

Mixed bundling is more profitable than pure bundling when A) the marginal cost of each good being sold is positive. B) the consumersʹ reservation values of each good being sold are not perfectly negatively correlated with one or another. C) Both A and B are correct. D) the marginal cost of one good is zero.

C

The price elasticity of demand for nursery products is -10. The advertising elasticity of demand is 0.4. Using the ʺRule of Thumb for Advertising,ʺ the profit maximizing level of advertising will be set at __________ of sales. A) 0.25 percent B) 0.4 percent C) 4 percent D) 40 percent

C

Under perfect price discrimination, consumer surplus A) is less than zero. B) is greater than zero. C) equals zero. D) is maximized.

C

Under perfect price discrimination, marginal profit at each level of output equal A) 0. B) P - AC. C) P - MC. D) P - AR.

C

Use the following statements to answer this question. I. To maximize profit, a firm will increase its advertising expenditures until the last dollar of advertising generates an additional dollar of revenue. II. The full marginal cost of advertising is the sum of the dollar spent directly on advertising and the marginal production cost that results form the increased sales that advertising brings about. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

C

What is the key characteristic of profit maximizing price discrimination that distinguishes intertemporal price discrimination from peak-load pricing? A) Peak-load pricing does not require MC = MR. B) Marginal revenue may be different across different groups of buyers under intertemporal price discrimination. C) Marginal costs are independent across time periods under peak-load pricing. D) Marginal revenue must be constant under both pricing schemes.

C

Which of the following is NOT a condition for third-degree price discrimination? A) Monopoly power B) Different own price elasticities of demand C) Economies of scale D) Separate markets

C

Which of the following product pairs would NOT be good candidates for price discrimination through tying? A) Razors and razor blades B) Ink-jet printers and ink cartridges C) Pencils and paper D) Cellular telephones and cell phone service

C

You interview with an athletic footwear manufacturer that has annual advertising expenditures of $32 million and total sales revenue of $100 million, and the firm selects the profit maximizing level of advertising expenditures. If the advertising elasticity of demand is 0.4, then you know that "Rule of Thumb for Advertising" implies that the demand for the firm 's products is: A) inelastic. B) unit elastic. C) elastic. D) zero.

C

Bundling products makes sense for the seller when A) consumers have heterogeneous demands. B) the products are complementary in nature. C) firms cannot price discriminate. D) both A and C.

D

Your local grocery store offers a coupon that reduces the price of milk during the coming week. The regular retail price of milk in the store is $3.00 per gallon, and the coupon price is $2.00 per gallon for the next week. If the store maximizes profits and the price elasticity of demand for milk is -2 for coupon users, what is the price elasticity of demand for non-users? A) -0.67 B) -1.0 C) -1.5 D) We do not have enough information to answer the question.

C

What is social surplus

Consumer Surplus + Producer Surplus

14. A firm employs 100 workers at a wage rate of $10 per hour, and 50 units of capital at a rate of $21 per hour. The marginal product of labor is 3, and the marginal product of capital is 5. The firm a) is producing its current output level at the minimum cost. b) could reduce the cost of producing its current output level by employing more capital and less labor. c) could reduce the cost of producing its current output level by employing more labor and less capital. d) could increase its output at no extra cost by employing more capital and less labor. e) Both B and D are true.

D

If there are open first-class seats available on a particular flight, some airlines allow customers with coach (discount) tickets to upgrade to first-class tickets during the electronic check-in process. Suppose the regular price of a first-class ticket is $800, the total price of the upgrade ticket (original price plus the upgrade) is $400, the marginal cost of serving both types of customers (full-fare and upgrade first-class flyers) is $100, and the airline maximizes profits. Which of the following statements is true? A) MR for the full-fare customers must be higher than the MR from upgrade customers. B) MR for the full-fare customers may be higher or lower than the MR from upgrades. C) MR = MC for the full-fare customers, but the airline is willing to collect any positive amount from the upgrade customers. D) MR must be the same for both full-fare and upgrade customers.

D

Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm: A) is trying to reduce its costs and therefore increase its profit. B) is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act. C) is attempting to convert producer surplus into consumer surplus. D) is attempting to convert consumer surplus into producer surplus. E) Both A and C are correct.

D

Season ticket holders for the St. Louis Rams received a surprise when they read the applications forms to renew their season tickets. In order to get their season ticket to the Ramsʹ home games, they also had to buy tickets to the preseason games. Many season ticket holders grumbled about this practice as an underhanded way for the St. Louis Rams to get more money from its season ticket holders. This practice is an example of: A) peak-load pricing. B) intertemporal price discrimination. C) two-part tariff. D) bundling. E) Both A and B are correct.

D

The pricing technique known as tying A) permits a firm to meter demand. B) permits a firm to practice price discrimination. C) enables a firm to extend its monopoly power to new markets. D) all of the above

D

When a firm charges each customer the maximum price that the customer is willing to pay, the firm A) engages in a discrete pricing strategy. B) charges the average reservation price. C) engages in second-degree price discrimination. D) engages in first-degree price discrimination.

D

Which of the following strategies are used by business firms to capture consumer surplus? A) Price discrimination B) Bundling C) Two-part tariffs D) all of the above

D

You produce stereo components for sale in two markets, foreign and domestic, and the two groups of consumers cannot trade with one another. If your firm practices third -degree price discrimination to maximize profits, the marginal revenue A) in the foreign market will equal the marginal cost. B) in the domestic market will equal the marginal cost. C) in the domestic market will equal the marginal revenue in the domestic market. D) all of the above E) none of the above

D

13. With its current levels of input use, a firm's MRTS is 3 (when capital is on the vertical axis and labor is on the horizontal axis). This implies a) the firm could produce 3 more units of output if it increased its use of capital by one unit (holding labor constant). b) the firm could produce 3 more units of output if it increased its use of labor by one unit (holding capital constant). c) if the firm reduced its capital stock by one unit, it would have to hire 3 more workers to maintain its current level of output. d) if it used one more unit of both capital and labor, the firm could produce 3 more units of output. e) the marginal product of labor is 3 times the marginal product of capital.

E

A local restaurant offers an ʺall-you-can-eatʺ salad bar for $3.49. However, with any sandwich, a customer can add the ʺall-you-can-eatʺ salad bar for $1.49. This is an example of A) peak-load pricing. B) second-degree price discrimination. C) a two-part tariff. D) tying. E) none of the above

E

Club Med, which operates a number of vacation resorts, offers vacation packages at a lower price in the winter (i.e., the ʺoff seasonʺ) than in the summer. This practice is an example of: A) peak-load pricing. B) intertemporal price discrimination. C) two-part tariff. D) bundling. E) Both A and B are correct.

E

Suppose a firm produces identical goods for two separate markets and practices third-degree price discrimination. In the first market the firm charges $30 per unit, and it charges $22 per unit in the second market. Which of the following represents the ratio of price elasticities of demand in the two markets? A) E2 = (21/29)E1 B) E2 = (29/21)E1 C) E2=E1 D) E2 = (22/30)E1 E) none of these

E

Economic Profit

Price - ATC

9. Laser disc players have been around for 10 years, but in the last several years, the sales have skyrocketed. Manufacturers attribute the increase in sales to lower prices, increased availability of movies on laser disk, and the appearance of laser disks for rent in video cassette rental stores. Describe this market using the concept of network externalities.

There is a strong positive network externality at work in the laser disk player market. Laser disk players can only play movies that are prerecorded on disks. As more movies become available, and as disk rental has become a reality, more people are buying the laser disk players. The sales of laser disk players has also been aided by lower prices, but the effect of the lower prices is not a positive network externality.

P=MR

Under perfect competition, this equivalence statement is true because regardless of how many units a firm sells, the price stays constant. Each additional unit sells for the same price regardless of the quantity sold.

17. What is an informational cascade? a) An excess flow of market information that makes it difficult for an investor to form a rational decision. b) A continual decline in the quality of market information from public sources due to sequential budget cuts. c) A continual increase in the quality of market information from public sources due to broader use of the internet by market participants. d) A sequence of decisions based on actions of others rather than fundamental information.

a sequence of decisions based on actions of others rather than fundamental information

22. Standard game theory predicts a solution to the ultimatum game that is rarely observed when people actually play the game. The key reason that behavioral economists believe the predicted and observed outcomes differ is because people account for ________ of the outcome when making decisions. a) loss aversion b) fairness c) efficiency d) utility

fairness

pure bundling

selling products only as a package