Module 4 Exam

Which of the following is not true of monopolists?

Monopolists can charge any price they want and make a profit.

Under which type of market structure is price rigidity (stickiness) often predicted?

Oligopoly

Under perfect price discrimination:

consumer surplus is zero

A profit-maximizing monopoly will produce an output where

demand is elastic.

An all-or-nothing demand curve

gives the average value of a given quantity.

Under ordinary price discrimination in several markets, a monopolist would allocate output to ensure that in each market

marginal revenue is the same

If a consumer's demand curve is given by P = 50 - Q, and the marginal cost of a good is 10, a monopolist using all-or-nothing pricing would charge:

30 per unit for 40 units.

Under multi-part pricing

: consumers may pay different prices for different blocks purchased.

Which three of the following characteristics apply to oligopoly?

A few large firms account for a high percentage of industry output. Each firm faces a downward sloping demand curve. The industry is often characterised by extensive non-price competition.

If arbitrage exists between two markets a monopolist is price discriminating in, the monopolist will:

be unable to set a price difference between the markets greater than the arbitrage costs.

Compared to the productive efficiency of a perfectly competitive firm, a monopolist tends to be

inefficient

A market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright is a

legal monopoly.

For a nondiscriminating monopolist, marginal revenue is

less than price

A nondiscriminating monopolist's demand curve

lies above its marginal revenue curve

Under ordinary price discrimination, the monopolist charges a higher price in the market with

lower elasticity of demand

A tie-in sale

lowers the price of the monopoly good and raises the price of the tied good.

Under ordinary price discrimination in several markets, a monopsonist would allocate purchases to ensure that in each market:

marginal factor cost is the same.

With perfect price discrimination, the market demand curve becomes the

marginal revenue curve.

Suppose that a price-discriminating monopolist divides its market into two segments. In each market segment, price is determined by finding the level of output where that market's

marginal revenue equals marginal cost

All forms of price discrimination are intended to:

maximize profits.

An electricity firm offering electricity at 9.62 cents per kWh for the first 1000 kWh/month, and 5.10 cents per kWh for each kWh beyond 1000 kWh/month is using:

multipart pricing.

An industry in which one firm can supply the entire market at a lower price than two or more firms can is a

natural monopoly.

In order to price discriminate, it is important to:

prevent resale of the product

In perfect competition, a firm's marginal revenue equals its:

price

Buffet pricing is an example of

two-part pricing

One major advantage of _____________ is that the firm does not have to worry about market segmentation and the problem of resale.

two-part tariff pricing

If a monopolist can perfectly price discriminate, then MR is equal to:

the demand curve

In the short run, a monopolist will shut down when

average variable cost is greater than price at all output levels

All of the following price discrimination policies allow a firm to capture some of the deadweight loss or to extract some of the consumer's surplus, except:

Bundle pricing.

To achieve more market power, firms can:

Differentiate their products from the products of their rivals.

One difference between perfect competition and monopolistic competition is that:

Firms in monopolistic competition have some degree of market power.

For the nondiscriminating monopolist,

P = AR > MR

Which of the following is true?

Patents give a temporary exclusive right to produce a new good.

A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following

Raise price and lower output.

Which two of the following assumptions apply to 'kinked-demand' analysis in oligopoly markets?

Rivals will reduce prices in response to the firm's lower prices. Rivals will tend not to raise prices in response to the firm's higher prices.

Ordinary price discrimination occurs where:

The monopolist identifies potential customers by groups and charges each group a separate price.

Which one of the following does NOT occur in perfect competition?

There are significant restrictions on entry into the industry.

Patent laws promote technical progress in all of the following ways except one. Which is the exception?

They allow other firms to copy successful products as soon as they are marketed.

In the long run, which of the following is not a problem for a monopolist earning economic profit?

all profit will gradually be converted to consumer surplus

Perfect competition occurs in a market where there are many firms each selling:

an identical product

In Canada, price discrimination is:

an offence under the Act, since 1935.

Which of the following could not bar entry into an industry?

diseconomies of scale

Which of the following would not bar entry into a market?

economies of scale

When an increase in its output of a good or service brings a decrease in the average total cost of producing it, the firm experiences

economies of scale.

When an increase in the range of goods produced brings a decrease in average total cost, a firm experiences

economies of scope.

Perfect price discrimination results when:

every consumer is forced to pay his or her reservation price.

For a single-price monopoly, price

exceeds marginal cost.

A tie-in sale allows a monopolist to:

extract most but not all of the consumer surplus of the monopoly good. effect increased demand to stimulate more sales

Any attempt to capture a consumer surplus, a producer surplus, or an economic profit is called

rent seeking.

Compared to a perfectly competitive industry, a single-price monopoly

restricts its output and charges a higher price.

Coupons and mail-in rebates for consumer goods and lower fares, coupled with Saturday stay-over requirements for airlines are examples of mechanisms designed to foster price discrimination through:

self selection

Lining up at a movie theatre on opening night is a form of:

self-selection.

The optimal two-part tariff strategy involves

setting price equal to marginal cost and charging a fee equal to the remaining consumer surplus.

The more perfectly the monopoly can price discriminate,

the closer its output gets to the competitive output and the more efficient is the outcome.

If we require a monopolist to stop practicing ordinary price discrimination across two markets, one of two things will happen

the monopolist will stop selling in the more elastic market or begin charging a price in both markets which is a weighted average of the previous discriminatory prices.

The U.S. Postal Service has found its monopoly eroded over time because

the price of stamps has increased relative to other substitutes, such as the telephone

A firm will find it difficult to engage in price discrimination if:

there are close substitutes.

Firms can earn economic profits even in the long run if

there are significant barriers to entry