Econ Exam 2

Airlines charge a _______ to business travelers compared to leisure travelers because business travelers have a _____ demand than leisure travelers.

Higher, Less elastic

For products like parking lots and hotels, cost of building capacity are mostly fixed or sunk and firms in this industry typically face constraints. Therefore,

If SRMR>SRMC at capacity, then the firms should price to fill capacity

In a competitive market with identical firms,

free entry and exit into the market requires that firms earn zero profit in the Long run even tho they had profit in the short run

Mixed bundling is where customers

have a choice of buying each item separately or all items at one price

A monopolist's profit maximizing price is $15. At MC=MR, the output is 100 units and the MC is $10. At this level of production, average total costs are $12

$300

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

Arbitrage

One of the limitation of Five Forces is that

For one firm to increase profit, it takes from other participants in the industry

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington. Since the market for wheat is generally considered to be competitive , the Wheeler farm does not

Choose the price at which it sells its wheat

Movie theaters decided to increase the price of movie tickets. Holding other factors constant, what happens to the demand for popcorn in the movie theaters?

Demand for popcorn shifts to the left because popcorn and movies are complementary goods.

Why might Mattel set a much lower margin on its barbie dolls than on the accessories for the dolls?

Increasing the price would lower the demand, keep the price lower to broaden the consumer base.

Firms can practice indirect price discrimination by

Offering volume discounts, Using two-part pricing, offering a bundle containing a number of units.

When grocery stores offer discount coupons on Sunday papers, it is trying to

Price Discriminate.

An assumption that underline resource- based view include

Resource heterogeneity and Resource Immobility

The pricing rule MR=MC hold for

Single product firms

The wages for Nike workers increases. At the same time, we see the price for adidas shoes increase. How does this affect the market for Nike shoes?

The demand curve will shift to the right, the supply curve will shift to the left

For direct price discrimination to work effectively

The low- valued group should not be able to arbitrage

You love bananas. Due to a bad crop harvest, the supply of bananas dropped in half. The price for bananas is expected to double in the near future. As a result...

Your demand for banana increases today

What are the characteristic of a monopoly

the firm is the one sole seller of its product and the product does not have close substitutes.