Question 1

Which of the following is true when comparing two part tariffs to ordinary price discrimination?

Accepted Answer

A) Both price schemes generate the same amount of profit in different ways. 
B) Both price schemes generate the same amount of profit in the same way. 
C) More profit is generated with two- part tariffs. 
D) More profit is generated with ordinary price discrimination. 
A) Both price schemes generate the same amount of profit in different ways. 
B) Both price schemes generate the same amount of profit in the same way. 
C) More profit is generated with two- part tariffs. 
D) More profit is generated with ordinary price discrimination. C

Question 2

A monopolist can sell in two separate markets with demand curves p1 = 160 - 8q1 and p2 = 80 - 2 2. The monopolist's marginal cost is 5 + Q. What will be the prices charged by the monopolist in the two markets? What are the quantities sold in the two markets?

Accepted Answer

p₁= 53.33, p₂= 63.33, q₁= 13.33, q₂= 8.33.

Question 3

Firms with monopoly power will price discriminate when ever possible because

Accepted Answer

A) it makes the price of the last unit sold lower which makes customers happy 
B) discrimination increases profits 
C) discrimination reduces costs 
D) it reduces the dead weight loss and is better for society 
A) it makes the price of the last unit sold lower which makes customers happy 
B) discrimination increases profits 
C) discrimination reduces costs 
D) it reduces the dead weight loss and is better for society B

Question 4

Arbitrage refers to:

Accepted Answer

A) the activity of a referee. 
B) the ability to buy a good in a low- price market and resell it in a high- price market. 
C) certain activities undertaken by firms. 
D) the strategy developed by a monopolist engaged in ordinary price discrimination in order to increase its profits. 
A) the activity of a referee. 
B) the ability to buy a good in a low- price market and resell it in a high- price market. 
C) certain activities undertaken by firms. 
D) the strategy developed by a monopolist engaged in ordinary price discrimination in order to increase its profits.

Question 5

Which of the following are genuine tie- in pricing schemes?

Accepted Answer

A) a copying machine that works with a special type of paper only 
B) a digital camera. 
C) the sale of a browser with an operating system. 
D) the sale of popcorn at the mall. 
A) a copying machine that works with a special type of paper only 
B) a digital camera. 
C) the sale of a browser with an operating system. 
D) the sale of popcorn at the mall.

Question 6

In the case of perfect price discrimination marginal revenue is usually:

Accepted Answer

A) decreasing. 
B) equal to the marginal cost. 
C) larger than the average revenue. 
D) equal to the price. 
A) decreasing. 
B) equal to the marginal cost. 
C) larger than the average revenue. 
D) equal to the price.

Question 7

Under ordinary price discrimination:

Accepted Answer

A) all customers pay the same price. 
B) customers may pay different prices for each block they purchase. 
C) each group may pay a different price. 
D) each customer may pay a different price. 
A) all customers pay the same price. 
B) customers may pay different prices for each block they purchase. 
C) each group may pay a different price. 
D) each customer may pay a different price.

Question 8

A monopolist operates in two markets whose demand functions are p1 = 100 - q1 and p2 =120 - 0.5q2. The monopolist has a constant marginal cost of $40.
a)Find the prices and market quantities when the monopolist cannot price discriminate between the two markets.
b)Calculate the price elasticity for each market demand and evaluate it at the price and quantities derived in a. If the monopolist is allowed to use price discrimination, which one of the two markets will have a higher price? Why?
c)Find the price and market quantities when the monopolist can price discriminate between the two markets.
d)Will the consumers in the first market be better off with discrimination or not? What about the consumers in the second market?

Accepted Answer

a)Calculate the aggregate demand and the

Question 9

A necessary condition for a monopolist to successfully practice ordinary price discrimination is the:

Accepted Answer

A) identification of buyers' reservation prices in all isolated markets. 
B) ability to segment its total market. 
C) identification of different price elasticities for each buyer. 
D) existence of profitable arbitrage between markets. 
A) identification of buyers' reservation prices in all isolated markets. 
B) ability to segment its total market. 
C) identification of different price elasticities for each buyer. 
D) existence of profitable arbitrage between markets.

Question 10

Which statement is inconsistent with a tie- in pricing scheme?

Accepted Answer

A) The monopolist charges prices that capture consumer surplus. 
B) The monopolist charges a zero price on the monopoly good and a high price on the tied- good. 
C) The monopolist charges a lower than equilibrium price on the monopoly good and higher than equilibrium price on the tied- good. 
D) The monopolist charges prices that generate dead weight loss. 
A) The monopolist charges prices that capture consumer surplus. 
B) The monopolist charges a zero price on the monopoly good and a high price on the tied- good. 
C) The monopolist charges a lower than equilibrium price on the monopoly good and higher than equilibrium price on the tied- good. 
D) The monopolist charges prices that generate dead weight loss.

Question 11

A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of:

Accepted Answer

A) tying. 
B) perfect price discrimination. 
C) ordinary price discrimination. 
D) a two- part tariff. 
A) tying. 
B) perfect price discrimination. 
C) ordinary price discrimination. 
D) a two- part tariff.

Question 12

Which of the following can practice price discrimination the easiest?

Accepted Answer

A) a book publisher 
B) a record store 
C) a grocery store 
D) an oral surgeon 
A) a book publisher 
B) a record store 
C) a grocery store 
D) an oral surgeon

Question 13

A monopolist has total production costs given by 0.5 Q2. The demand function in the "home" market is P = 20 -
0.5 Q
a)If the monopolist sells all its output to the home market, what is the equilibrium price and quantity?
b)Now suppose the monopolist has a choice between the home market and a foreign market in which the monopolist can sell any amount Q at a price of $12. Will the monopolist sell in the foreign market? If yes, what would happen to the price the monopolist charges in the home market?

Accepted Answer

a)p = 15;
b)Yes, the monopoly

Question 14

An all- or- nothing demand curve:

Accepted Answer

A) tells us the total value of a given quantity. 
B) tells us the marginal value of a given quantity. 
C) tells us the average value of a given quantity. 
D) is the same as an ordinary demand curve. 
A) tells us the total value of a given quantity. 
B) tells us the marginal value of a given quantity. 
C) tells us the average value of a given quantity. 
D) is the same as an ordinary demand curve.

Question 15

In order to maximize revenue from the sale of a fix quantity of output in two markets, a monopolist engaged in ordinary price discrimination would:

Accepted Answer

A) sell half the goods in each market. 
B) make sure it sells all the units of the good. 
C) allocate output so that MC is the same in both markets. 
D) allocate output so that MR is the same in both markets. 
A) sell half the goods in each market. 
B) make sure it sells all the units of the good. 
C) allocate output so that MC is the same in both markets. 
D) allocate output so that MR is the same in both markets.

Question 16

Two- part tariffs:

Accepted Answer

A) are always better than price discrimination. 
B) work best when consumers are similar. 
C) work best when consumers vary in their preference for the good. 
D) never exploit all of the gains from trade. 
A) are always better than price discrimination. 
B) work best when consumers are similar. 
C) work best when consumers vary in their preference for the good. 
D) never exploit all of the gains from trade.

Question 17

Back in the dark ages (1980s)there was an active secondary market in airline tickets. Now, due to security concerns, passengers are required to show identification twice before boarding a plane. Once at check- in and once clearing security. Why didn't airlines oppose the extra costs of having to check identification?

Accepted Answer

A) checking identification does not affect marginal costs 
B) airlines are as concerned about security as the government 
C) identification provides information for the airlines 
D) requiring identification prohibits arbitrage 
A) checking identification does not affect marginal costs 
B) airlines are as concerned about security as the government 
C) identification provides information for the airlines 
D) requiring identification prohibits arbitrage

Question 18

Several magazine articles documented the reluctance of AIDS drug manufacturers to provide relief to developing countries. The likely reason for this is:

Accepted Answer

A) the high cost of transportation. 
B) their fears that arbitrage will severely cut into their profits. 
C) the inability of the developing countries to pay for the drugs. 
D) lack of compassion from their part. 
A) the high cost of transportation. 
B) their fears that arbitrage will severely cut into their profits. 
C) the inability of the developing countries to pay for the drugs. 
D) lack of compassion from their part.

Question 19

A firms sells an identical product to two groups of consumers, A and B. The firm has decided that ordinary 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?

Accepted Answer

A) MRA = MRB = MC. 
B) (MRA - MR
B) = (1 - M
C) . 
C) PA = PB = MC. 
D) MRA = MRB. 
A) MRA = MRB = MC. 
B) (MRA - MR
B) = (1 - M
C) . 
C) PA = PB = MC. 
D) MRA = MRB.

Question 20

Which of the following are essential for perfect price discrimination?

Accepted Answer

A) the ability to prevent the resale of the product 
B) knowledge of every customer's income 
C) knowledge of the supply curve. 
D) approval from the regulator. 
A) the ability to prevent the resale of the product 
B) knowledge of every customer's income 
C) knowledge of the supply curve. 
D) approval from the regulator.

Which of the following is true when comparing two part tariffs to ordinary price discrimination?

A monopolist can sell in two separate markets with demand curves p₁= 160 - 8q₁and p₂= 80 - 2 _2.The monopolist's marginal cost is 5 + Q. What will be the prices charged by the monopolist in the two markets? What are the quantities sold in the two markets?

Firms with monopoly power will price discriminate when ever possible because

Arbitrage refers to:

Which of the following are genuine tie- in pricing schemes?

In the case of perfect price discrimination marginal revenue is usually:

Under ordinary price discrimination:

A necessary condition for a monopolist to successfully practice ordinary price discrimination is the:

Which statement is inconsistent with a tie- in pricing scheme?

A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of:

Which of the following can practice price discrimination the easiest?

An all- or- nothing demand curve:

In order to maximize revenue from the sale of a fix quantity of output in two markets, a monopolist engaged in ordinary price discrimination would:

Two- part tariffs:

Several magazine articles documented the reluctance of AIDS drug manufacturers to provide relief to developing countries. The likely reason for this is:

A firms sells an identical product to two groups of consumers, A and B. The firm has decided that ordinary 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?

Which of the following are essential for perfect price discrimination?

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 14: Price Discrimination Monopoly Practices

Which of the following is true when comparing two part tariffs to ordinary price discrimination?

A monopolist can sell in two separate markets with demand curves p1 = 160 - 8q1 and p2 = 80 - 2 2. The monopolist's marginal cost is 5 + Q. What will be the prices charged by the monopolist in the two markets? What are the quantities sold in the two markets?

Firms with monopoly power will price discriminate when ever possible because

Arbitrage refers to:

Which of the following are genuine tie- in pricing schemes?

In the case of perfect price discrimination marginal revenue is usually:

Under ordinary price discrimination:

A necessary condition for a monopolist to successfully practice ordinary price discrimination is the:

Which statement is inconsistent with a tie- in pricing scheme?

A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of:

Which of the following can practice price discrimination the easiest?

An all- or- nothing demand curve:

In order to maximize revenue from the sale of a fix quantity of output in two markets, a monopolist engaged in ordinary price discrimination would:

Two- part tariffs:

Several magazine articles documented the reluctance of AIDS drug manufacturers to provide relief to developing countries. The likely reason for this is:

A firms sells an identical product to two groups of consumers, A and B. The firm has decided that ordinary 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?

Which of the following are essential for perfect price discrimination?

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

A monopolist can sell in two separate markets with demand curves p₁= 160 - 8q₁and p₂= 80 - 2 _2.The monopolist's marginal cost is 5 + Q. What will be the prices charged by the monopolist in the two markets? What are the quantities sold in the two markets?