econ exam 4
under perfect price discrimination: all of the answers are correct there is no deadweight loss consumer surplus is zero output is the same in a competitive market
all of the answers are correct
oligopoly differs from monopolistic competition in that an oligopoly includes barriers to entry no barriers to entry downward-sloping demand curves facing the firm product differentiation
barriers to entry
Two-part tariff pricing offers a mechanism whereby the firm: -charges two different prices to distinct groups of customers. -can capture some or all of the consumer surplus. -will reduce some of its fixed costs. -collects two times as much in revenue from consumers as a single-price monopoly.
can capture some or all of the consumer surplus.
a monopolist can charge different prices for online and offline customers, this is an example of third-degree price discrimination two-part tariff fire-degree discrimination bundling
third-degree price discrimination
At the current price of a good, Al's consumer surplus equals 500, and Betty's consumer surplus equals 600. By using two-part pricing, a monopolist could increase his profit by 500. 1000. None of the answers is correct 600 1100
1000
The figure is drawn for a monopolistically competitive firm. The firm's profit-maximizing price is 12 8 18 24
18
suppose a firm with market power is considering implementing a two-part tariff. The firm faces two types of consumers: one that has a consumer surplus of 180 and one has a consumer surplus of 240. What should the firm set the access fee in order to maximize the profits? 240 420 360 180
180
Which of the following has the same output as in a competitive market? None of the answers are correct Monopolistic competitive firm Non-price discriminating monopolist 1st degree price discriminating monopolist
1st degree price discriminating monopolist
Assume a company can offer customers cable television and internet service at a marginal and average cost of $15 for each individual unit. Also assume the company does not price discriminate. The table shows each customer's marginal willingness to pay for television and internet services. What is the max profit if the monopolist cannot bundle (that is, if they sell separately)? 460 520 610 760
520
Which of the following is an example for group (3rd degree) price discrimination? the fact that a printer is cheap and ink cartridges are expensive A BMW selling for more than a VW a hotel charging more for a room if the customers bring pets A tennis pro charges $20 per hour for tennis lessons for children and $40 per hour for tennis lessons for adults. a university offering different needs-based scholarships for each student.
A tennis pro charges $20 per hour for tennis lessons for children and $40 per hour for tennis lessons for adults.
Diane is considering starting her own commercial airline. Her industry research yields the following facts. Airline passengers are not very loyal to particular airlines and are very price sensitive, despite frequent flyer programs. The vast majority of commercial jets are produced by Airbus and Boeing. In the United States, there are 17 major air carries and 42 other carriers. These numbers fluctuate from year to year. For instance, in 2008 there were 22 major carriers and 65 other carriers. Communication technology continues to improve, and more and more businesspeople are choosing to use communication technology for business meetings. Which of the following about the five forces analysis of the airline industry are true? None of the answers is correct. The fact that "airline passengers are not very loyal to particular airlines and are very price sensitive, despite frequent flyer programs" suggests that buyer power is a strong force against airline profits. All of the answers are correct. The fact that "the vast majority of commercial jets are produced by Airbus and Boeing" suggests that supplier power is a strong force against airline profits. The five-forces industry analysis suggests that airlines is not a profitable industry for Diane to enter.
All of the answers are correct.
Market power is needed for firms to price discriminate in which types of price discrimination? None, competitive firms can price discriminate Only 3rd degree Only 1st degree Both 1st and 3rd degree
Both 1st and 3rd degree
Assume a company can offer customers cable television and internet service at a marginal and average cost of $20 for each individual unit. Also assume the company does not price discriminate. The table shows each customer's marginal willingness to pay for television, internet services, and for a bundle containing both. Which strategy yields the maximum profit, and what maximum profit is obtained? Bundle and make a profit of $620. Sell separately and make a profit of $580. Sell separately and make a profit of $620. Bundle and make a profit of $600.
Bundle and make a profit of $600.
The figure is drawn for a monopolistically competitive firm. If the AC=16 at the profit-maximizing level of output, which of the following will occur in the long run in this industry? This firm will continue to earn positive economic profits. Firms will enter this industry. This firm will continue to earn negative economic profits Firms will exit this industry.
Firms will enter this industry.
A typical firm in a cartel will hold which of the following beliefs? I can never do better for myself than following agreed-upon cartel rules. If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat. If everyone cheats, I'm better off, and so is everyone in the cartel. If I alone cheat, I'm better off; if everyone cheats, I'm worse off.
If I alone cheat, I'm better off; if everyone cheats, I'm worse off.
What happens to an incumbent firm's demand curve in monopolistic competition as existing firms exit? It becomes flatter. Firms exiting the market will not affect an incumbent firm's demand curve. It shifts right. It shifts left.
It shifts right.
Which of the following firms is most likely to be in monopolistic competition? Why? McDonalds, barriers to entry Tucson Electric power, barriers to entry Tucson Electric power, product differentiation None of the answers are correct McDonalds, product differentiation
McDonalds, product differentiation
Which types of markets have barriers to entry? Only monopolistic competition Monopolistic competition and oligopoly Oligopoly and monopoly Only oligopoly Only perfect competition
Oligopoly and monopoly
PA = 30 and PB = 45. PA = 55, and PB = 40. PA = 60, and PB = 45. PA = 45, and PB = 15. None of the answers is correct
PA = 60, and PB = 45.
In which of the following types of markets are firms price takers? Perfect competition only Monopolistic competition and oligopoly Monopolistic competition, oligopoly, and monopoly Monopolistic competition only Monopolistic competition and perfect competition
Perfect competition only
A firm with market power has identified two different market segments (students and non-students) for which demand differs. Its marginal cost is constant and does not differ by market segment. The firm engages in third-degree price discrimination. After selling all of its output, the firm discovers that the marginal revenue it earned on the last unit sold to students was $100 and the marginal revenue it earned on the last unit sold to non-students was $80. For the given amount of output that the firm produced, which of the following is true? To maximize profit the firm should have sold less output in the student market and more in the non-student market. None of the answers is correct. To maximize profit the firm should have sold where MR was zero in both markets. To maximize profit the firm should have sold more in the student market and less in the non-student market.
To maximize profit the firm should have sold more in the student market and less in the non-student market.
which of the following is an example for perfect (1st degree) price discrimination? A dealership sells a toyota for more than a honda a movie theatre charges 8 for kids but 12 for adults a horse breeder sells horses for a different price to each customer because he knows how much they are willing to pay a restaurant charges 7 for fingers and 8 for sandwich
a horse breeder sells horses for a different price to each customer because he knows how much they are willing to pay
which of the following is most correct? charges different prices to different groups of consumers takes advantage of the consumer reservation prices being negatively correlated charges every consumer a different price charges an entry fee in addition to a per unit fee
charges an entry fee in addition to a per unit fee
what is the aspect of monopolistic competition that is most distinct from perfect competition? perfect information free entry/exit differentiated products zero profits
differentiated products
a third-degree price discriminating monopolist can sell output in either the local market or on an internet site (or both). IF the price elasticity of demand for the firms output is greater on the internet site than in the local market. which of the following will be correct? firm will sell more in local market insufficient information firm will sell more of its products on the internet site firm will sell a lower price on the internet site
firm will sell a lower price on the internet site
Which of the following is NOT true? In the long run in monopolistic competition, a firm earns an economic profit of zero. All of the answers are true. has no excess capacity sets MR = MC. sets P > MC.
has no excess capacity
Perfect competition and monopolistic competition both have _________________. Monopoly and monopolistic competition both have ___________________. homogenous products, some degree of market power homogenous products, high barriers to entry many firms, some degree of market power many firms, high barriers to entry
homogenous products, some degree of market power
A monopolist has identified two different market segments and is considering charging a different price in each segment. The monopolist should charge the __________________ group a higher price. higher demand more elastic less elastic lower demand
less elastic
what happens to an incumbent firm's demand curve in a monopolistic competition as new firms enter? becomes stepper will not affect shifts left shifts right
shifts left
Jonzy's Sandwich shop has constant marginal cost of $3. It has estimated that students have constant demand elasticity of -2 while non-students have a constant demand elasticity of -1.5. To maximize profit, Jonzy's should charge students $6 and non-students $9. students $4.5 and non-students $9 students $6 and non-students $12. students $10 and non-students $5.
students $6 and non-students $9.
which of the following conditions must be true so that a firm can price discriminate? All of the answers are correct there are no other firms in the market the firm must have market power the good is a non-durable demand must be unit elastic
the firm must have market power
theme parks may charge an entrance fee and a per-ride fee. this is an example of bundling two-part tariff first-degree discrimination third-degree price discrimination
two-part tariff
Many cellphone plans charge a monthly plan fee as well as a per unit fee for each minute or each megabyte used. This is an example of: second-degree price discrimination third-degree price discrimination. first-degree discrimination. two-part tariff. bundling
two-part tariff.
can firms in an oligopoly or monopolistic competition set prices above MC? yes, they have no market power no, oligopolies take high barriers to entry yes, they have market power no, monopolistic competitive firms have no market power
yes, they have market power
