Question 1

Which of the following is not a prerequisite for practicing third-degree price discrimination?

Accepted Answer

A) Some degree of monopoly power 
B) Ability to separate customers into two or more identifiable groups 
C) Some mechanism to prevent resale of the product among groups 
D) A perfectly competitive market for inputs 
A) Some degree of monopoly power 
B) Ability to separate customers into two or more identifiable groups 
C) Some mechanism to prevent resale of the product among groups 
D) A perfectly competitive market for inputs D

Question 2

A monopolist has segmented its customers into three groups,A,B,and C,and is discriminating prices between them.Each type A customer has a price elasticity of demand equal to 1.2;each type B customer has a price elasticity of demand equal to 6;and each type C customer has a price elasticity of demand equal to 11.If the firm charges type C customers $11 per unit,what prices should it charge its type A and type B customers in order to maximize profit?

Accepted Answer

A) Type A = $1.20 per unit and type B = $6.00 per unit 
B) Type A = $1.33 per unit and type B = $1.66 per unit 
C) Type A = $12.00 per unit and type B = $6.00 per unit 
D) Type A = $60.00 per unit and type B = $12.00 per unit 
A) Type A = $1.20 per unit and type B = $6.00 per unit 
B) Type A = $1.33 per unit and type B = $1.66 per unit 
C) Type A = $12.00 per unit and type B = $6.00 per unit 
D) Type A = $60.00 per unit and type B = $12.00 per unit D

Question 3

A profit-maximizing monopolist employing a two-part tariff on consumers having different demands,_____.

Accepted Answer

A) should simply set price to maximize total revenue 
B) should charge a single price,with no entry fee,like a regular monopolist 
C) should set price equal to average cost plus a constant profit margin 
D) does not have a clearly defined profit-maximizing pricing scheme 
A) should simply set price to maximize total revenue 
B) should charge a single price,with no entry fee,like a regular monopolist 
C) should set price equal to average cost plus a constant profit margin 
D) does not have a clearly defined profit-maximizing pricing scheme D

Question 4

Which of the following conditions will allow a monopolist to charge different prices in different markets?

Accepted Answer

A) Having the ability to prevent resale of its product 
B) Incurring a constant marginal cost of producing output 
C) Catering to a different number of consumers in each market 
D) Facing a positively sloped marginal revenue curve 
A) Having the ability to prevent resale of its product 
B) Incurring a constant marginal cost of producing output 
C) Catering to a different number of consumers in each market 
D) Facing a positively sloped marginal revenue curve

Question 5

The following figure shows the indifference curves US1U1B11S1U1B0 and US1U1B12S1U1B0 of a consumer choosing between hours devoted at a tennis club and other goods.All consumers in this market have identical demand curves.IZ is the original budget line of a representative consumer,which shifts to AB when the club begins to charge an entry fee.
Figure 12-3  
-In Figure 12-3,the consumer is indifferent between purchasing:

Accepted Answer

A) OF court hours and OE court hours. 
B) OZ court hours and OB court hours. 
C) zero court hours and OF court hours. 
D) zero court hours and OE court hours. 
A) OF court hours and OE court hours. 
B) OZ court hours and OB court hours. 
C) zero court hours and OF court hours. 
D) zero court hours and OE court hours.

Question 6

A firm charges a higher price for its product in the domestic market than it charges abroad.Which of the following pricing strategies is the firm using?

Accepted Answer

A) Targeting 
B) Block pricing 
C) Dumping 
D) Price skimming 
A) Targeting 
B) Block pricing 
C) Dumping 
D) Price skimming

Question 7

Intertemporal price discrimination is a form of:

Accepted Answer

A) first-degree price discrimination. 
B) block pricing. 
C) third-degree price discrimination. 
D) dumping. 
A) first-degree price discrimination. 
B) block pricing. 
C) third-degree price discrimination. 
D) dumping.

Question 8

A monopolist practicing second-degree price discrimination and facing a constant marginal cost:

Accepted Answer

A) should charge a higher price to the market segment that has the more elastic demand. 
B) sets the price schedule according to the number of units purchased by the consumers. 
C) need not worry about preventing resale of the product. 
D) will supply more output than a perfectly price discriminating monopolist. 
A) should charge a higher price to the market segment that has the more elastic demand. 
B) sets the price schedule according to the number of units purchased by the consumers. 
C) need not worry about preventing resale of the product. 
D) will supply more output than a perfectly price discriminating monopolist.

Question 9

Lewis owns an exclusive fashion accessories store and charges all consumers a uniform price for a particular product.Recently,however,he has realized that some of his customers are actually willing to pay a higher price for the items he sells,while some others feel that his prices are a little too high.Given this information,which of the following will not affect his ability to discriminate prices between these two consumer segments?

Accepted Answer

A) His level of monopoly power in this market 
B) His total investment in this business 
C) His ability to segment the market into high demand and low demand users 
D) His ability to prevent arbitrage 
A) His level of monopoly power in this market 
B) His total investment in this business 
C) His ability to segment the market into high demand and low demand users 
D) His ability to prevent arbitrage

Question 10

The following figure shows the downward sloping demand and marginal revenue [MR] curves and the upward sloping marginal cost [MC] curve of a monopolist.
Figure 12-2  
-Refer to Figure 12-2.A monopolist practicing first-degree price discrimination will sell _____ quantity of output.

Accepted Answer

A) OL 
B) OK 
C) OJ 
D) KL 
A) OL 
B) OK 
C) OJ 
D) KL

Question 11

Which of the following is true of a price discriminating monopolist employing a two-part tariff on consumers having different demands?

Accepted Answer

A) They earn less profit than the non-price discriminating monopolists. 
B) They supply an output which is higher than the non-price discriminating monopoly output. 
C) They set a price that is higher than the non- price discriminating monopoly price. 
D) They set an entry fee which is more than the total consumer surplus. 
A) They earn less profit than the non-price discriminating monopolists. 
B) They supply an output which is higher than the non-price discriminating monopoly output. 
C) They set a price that is higher than the non- price discriminating monopoly price. 
D) They set an entry fee which is more than the total consumer surplus.

Question 12

Block pricing by electric utilities is an example of:

Accepted Answer

A) predatory pricing. 
B) second-degree price discrimination. 
C) third-degree price discrimination. 
D) perfect price discrimination. 
A) predatory pricing. 
B) second-degree price discrimination. 
C) third-degree price discrimination. 
D) perfect price discrimination.

Question 13

Which of the following products/services provides the least scope for arbitrage?

Accepted Answer

A) Sports shoes 
B) Live concerts 
C) Jewelry 
D) Books 
A) Sports shoes 
B) Live concerts 
C) Jewelry 
D) Books

Question 14

When a monopolist practices third-degree price discrimination,price will be:

Accepted Answer

A) the same in each market if resale is not possible. 
B) higher in the market with the less elastic demand. 
C) higher in the market with the higher average cost. 
D) higher in the market will less number of consumers. 
A) the same in each market if resale is not possible. 
B) higher in the market with the less elastic demand. 
C) higher in the market with the higher average cost. 
D) higher in the market will less number of consumers.

Question 15

Derive the first-order conditions for profit maximization for a monopolist practicing price-discrimination.

Accepted Answer

Assume the monopoly sells in two markets

Question 16

Which of the following is true of intertemporal price discrimination?

Accepted Answer

A) In this form of price discrimination each consumer is charged his/her full willingness to pay. 
B) In this form of price discrimination groups are charged different prices according to the time of purchase. 
C) In this form of price discrimination monopolists capture the entire consumer surplus. 
D) In this form of price discrimination a consumer is charged a fixed fee in each time period. 
A) In this form of price discrimination each consumer is charged his/her full willingness to pay. 
B) In this form of price discrimination groups are charged different prices according to the time of purchase. 
C) In this form of price discrimination monopolists capture the entire consumer surplus. 
D) In this form of price discrimination a consumer is charged a fixed fee in each time period.

Question 17

The following figure shows the downward sloping demand and marginal revenue [MR] curves and the upward sloping marginal cost [MC] curve of a monopolist.
Figure 12-2  
-Refer to Figure 12-2.Comparing the result of perfect competition with that of a perfectly price-discriminating monopolist,there is an efficiency loss equal to:

Accepted Answer

A) area VWE. 
B) area HEF. 
C) area JHFK. 
D) zero.There will be no efficiency loss in either case. 
A) area VWE. 
B) area HEF. 
C) area JHFK. 
D) zero.There will be no efficiency loss in either case.

Question 18

Identify the correct statement about price discrimination.

Accepted Answer

A) Price discrimination is costless. 
B) Price discrimination is effective only if demand for the product is perfectly inelastic. 
C) Price discrimination is effective when producers face a downward-sloping demand curve. 
D) Price discrimination increases consumer surplus. 
A) Price discrimination is costless. 
B) Price discrimination is effective only if demand for the product is perfectly inelastic. 
C) Price discrimination is effective when producers face a downward-sloping demand curve. 
D) Price discrimination increases consumer surplus.

Question 19

The following figure shows the downward sloping demand and marginal revenue [MR] curves of a monopolist.The MR curve intersects the marginal cost [MC] curve at point B.MC is constant at the price level PS1U1B11S1U1B0.
Figure 12-1  
-In Figure 12-1,if the monopolist cannot price discriminate it will produce:

Accepted Answer

A) Q2 and sell at price P1. 
B) Q2 and sell at price P2. 
C) Q1 and sell at price P1. 
D) Q1 and sell at price P2. 
A) Q2 and sell at price P1. 
B) Q2 and sell at price P2. 
C) Q1 and sell at price P1. 
D) Q1 and sell at price P2.

Question 20

Consumer surplus is completely transferred to the price discriminating monopoly firm as profit under _____.

Accepted Answer

A) first-degree price discrimination 
B) predatory pricing 
C) third-degree price discrimination 
D) block pricing 
A) first-degree price discrimination 
B) predatory pricing 
C) third-degree price discrimination 
D) block pricing

Which of the following is not a prerequisite for practicing third-degree price discrimination?

A profit-maximizing monopolist employing a two-part tariff on consumers having different demands,_____.

Which of the following conditions will allow a monopolist to charge different prices in different markets?

A firm charges a higher price for its product in the domestic market than it charges abroad.Which of the following pricing strategies is the firm using?

Intertemporal price discrimination is a form of:

A monopolist practicing second-degree price discrimination and facing a constant marginal cost:

The following figure shows the downward sloping demand and marginal revenue [MR] curves and the upward sloping marginal cost [MC] curve of a monopolist. Figure 12-2 -Refer to Figure 12-2.A monopolist practicing first-degree price discrimination will sell _____ quantity of output.

Which of the following is true of a price discriminating monopolist employing a two-part tariff on consumers having different demands?

Block pricing by electric utilities is an example of:

Which of the following products/services provides the least scope for arbitrage?

When a monopolist practices third-degree price discrimination,price will be:

Derive the first-order conditions for profit maximization for a monopolist practicing price-discrimination.

Which of the following is true of intertemporal price discrimination?

Identify the correct statement about price discrimination.

The following figure shows the downward sloping demand and marginal revenue [MR] curves of a monopolist.The MR curve intersects the marginal cost [MC] curve at point B.MC is constant at the price level P₁. Figure 12-1 -In Figure 12-1,if the monopolist cannot price discriminate it will produce:

Consumer surplus is completely transferred to the price discriminating monopoly firm as profit under _____.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 12: Product Pricing With Monopoly Power

Which of the following is not a prerequisite for practicing third-degree price discrimination?

A profit-maximizing monopolist employing a two-part tariff on consumers having different demands,_____.

Which of the following conditions will allow a monopolist to charge different prices in different markets?

A firm charges a higher price for its product in the domestic market than it charges abroad.Which of the following pricing strategies is the firm using?

Intertemporal price discrimination is a form of:

A monopolist practicing second-degree price discrimination and facing a constant marginal cost:

The following figure shows the downward sloping demand and marginal revenue [MR] curves and the upward sloping marginal cost [MC] curve of a monopolist. Figure 12-2 -Refer to Figure 12-2.A monopolist practicing first-degree price discrimination will sell _____ quantity of output.

Which of the following is true of a price discriminating monopolist employing a two-part tariff on consumers having different demands?

Block pricing by electric utilities is an example of:

Which of the following products/services provides the least scope for arbitrage?

When a monopolist practices third-degree price discrimination,price will be:

Derive the first-order conditions for profit maximization for a monopolist practicing price-discrimination.

Which of the following is true of intertemporal price discrimination?

Identify the correct statement about price discrimination.

The following figure shows the downward sloping demand and marginal revenue [MR] curves of a monopolist.The MR curve intersects the marginal cost [MC] curve at point B.MC is constant at the price level P1. Figure 12-1 -In Figure 12-1,if the monopolist cannot price discriminate it will produce:

Consumer surplus is completely transferred to the price discriminating monopoly firm as profit under _____.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

The following figure shows the downward sloping demand and marginal revenue [MR] curves of a monopolist.The MR curve intersects the marginal cost [MC] curve at point B.MC is constant at the price level P₁. Figure 12-1 -In Figure 12-1,if the monopolist cannot price discriminate it will produce: