Question 1

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Accepted Answer

A) Patents encourage firms to spend money on research necessary to create new products. 
B) Politicians sometimes succumb to pressure from lobbyists to grant favours to businesses for political reasons. 
C) Patents are an important source of government revenue. 
D) Patents are justified because they are an important means for creating network externalities. 
A) Patents encourage firms to spend money on research necessary to create new products. 
B) Politicians sometimes succumb to pressure from lobbyists to grant favours to businesses for political reasons. 
C) Patents are an important source of government revenue. 
D) Patents are justified because they are an important means for creating network externalities.

Question 2

Price discrimination is the practice of

Accepted Answer

A) charging different prices for the same good when the price differences are not due to differences in cost. 
B) charging different prices for the same good when the price differences arise because of differences in cost. 
C) charging different prices for different qualities of a product. 
D) charging higher prices for brand named goods and lower prices for generic versions of the goods. 
A) charging different prices for the same good when the price differences are not due to differences in cost. 
B) charging different prices for the same good when the price differences arise because of differences in cost. 
C) charging different prices for different qualities of a product. 
D) charging higher prices for brand named goods and lower prices for generic versions of the goods.

Question 3

Some consumer electronic products such as plasma TVs,DVD players and digital cameras are introduced at very high prices,but over time,their prices start falling (beyond what could be attributed to falling costs as companies take advantage of economies of scale and cheaper technologies).Which of the following is the best explanation for this observation?

Accepted Answer

A) More firms are likely to enter the consumer electronic market over time,forcing market prices down. 
B) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait. 
C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods. 
D) After satisfying the demand for early adopters,firms lower price to attract the more price sensitive consumers. 
A) More firms are likely to enter the consumer electronic market over time,forcing market prices down. 
B) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait. 
C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods. 
D) After satisfying the demand for early adopters,firms lower price to attract the more price sensitive consumers.

Question 4

What is yield management? How is yield management being used in the airline industry?

Accepted Answer

Yield management is the use of sophistic

Question 5

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

Accepted Answer

A network externality exists where the u

Question 6

If price discrimination occurs in a market,

Accepted Answer

A) the law of one price does not hold. 
B) the firm earns arbitrage profits. 
C) consumers whose demand for the product sold is more elastic pay higher prices than consumers whose demand is less elastic. 
D) the marginal cost of production is constant. 
A) the law of one price does not hold. 
B) the firm earns arbitrage profits. 
C) consumers whose demand for the product sold is more elastic pay higher prices than consumers whose demand is less elastic. 
D) the marginal cost of production is constant.

Question 7

Economic efficiency requires that a natural monopoly's price be

Accepted Answer

A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) equal to the lowest price the firm can charge and still make a normal profit. 
A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) equal to the lowest price the firm can charge and still make a normal profit.

Question 8

A public franchise

Accepted Answer

A) is a corporation that is owned by stockholders. 
B) results from ownership of a key raw material. 
C) is a government designation that a private firm is the only legal producer of a good or service. 
D) is an unregulated monopoly necessary for the public good. 
A) is a corporation that is owned by stockholders. 
B) results from ownership of a key raw material. 
C) is a government designation that a private firm is the only legal producer of a good or service. 
D) is an unregulated monopoly necessary for the public good.

Question 9

Table 9-3
   Julie plans to start a pet-sitting service.She surveyed her neighbourhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 9-3 above shows a portion of her survey results.
-Refer to Table 9-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay.What is Julie's total revenue and how many hours of service will be purchased?

Accepted Answer

A) 4 hours and her total revenue = $39 
B) 4 hours and her total revenue = $28 
C) 1 hour and her total revenue = $7 
D) 5 hours and her total revenue = $35 
A) 4 hours and her total revenue = $39 
B) 4 hours and her total revenue = $28 
C) 1 hour and her total revenue = $7 
D) 5 hours and her total revenue = $35

Question 10

Figure 9-11   Figure 9-11 shows the cost and demand curves for a monopolist.
-Refer to Figure 9-11.If the firm maximises its profits,the deadweight loss to society due to this monopoly is equal to the area

Accepted Answer

A) ABF. 
B) ABEG. 
C) ACE. 
D) EFG. 
A) ABF. 
B) ABEG. 
C) ACE. 
D) EFG.

Question 11

Table 9-3
   Julie plans to start a pet-sitting service.She surveyed her neighbourhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 9-3 above shows a portion of her survey results.
-Refer to Table 9-3.If Julie charges $10 per hour,what is the value of the consumer surplus received by Dawn?

Accepted Answer

A) $2 
B) $10 
C) $12 
D) $22 
A) $2 
B) $10 
C) $12 
D) $22

Question 12

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximising outputs?

Accepted Answer

A) Marginal revenue is less than price. 
B) Marginal revenue equals marginal cost. 
C) Price equals marginal cost. 
D) Average revenue equals average cost. 
A) Marginal revenue is less than price. 
B) Marginal revenue equals marginal cost. 
C) Price equals marginal cost. 
D) Average revenue equals average cost.

Question 13

Price discrimination is a rational strategy for a profit-maximising firm when

Accepted Answer

A) it is possible to engage in arbitrage across market segments. 
B) it is not possible to segment consumers into identifiable markets. 
C) there is no opportunity for arbitrage across market segments. 
D) firms want to increase the amount of consumer surplus received by their customers. 
A) it is possible to engage in arbitrage across market segments. 
B) it is not possible to segment consumers into identifiable markets. 
C) there is no opportunity for arbitrage across market segments. 
D) firms want to increase the amount of consumer surplus received by their customers.

Question 14

a.What is the difference between a horizontal merger and a vertical merger?
b.Give an example of each type of merger.
c.Could a horizontal merger be welfare improving?

Accepted Answer

a.A horizontal merger is a merger betwee

Question 15

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

Accepted Answer

A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) corresponding to the demand curve where marginal revenue equals zero. 
A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) corresponding to the demand curve where marginal revenue equals zero.

Question 16

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand,the price in the market segment with more-elastic customer demand will be

Accepted Answer

A) greater than $34. 
B) less than $34. 
C) less than marginal revenue in that market segment. 
D) equal to marginal revenue in that market segment. 
A) greater than $34. 
B) less than $34. 
C) less than marginal revenue in that market segment. 
D) equal to marginal revenue in that market segment.

Question 17

A profit-maximising monopoly produces a lower output level than would be produced if the industry was perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 18

Book publishers use price discrimination routinely,but the form of price discrimination they use is different from the form used by airlines and other industries.Explain.

Accepted Answer

Some consumers in some markets are willi

Question 19

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25,then

Accepted Answer

A) to maximise profit the firm should increase output. 
B) to maximise profit the firm should decrease output. 
C) to maximise profit the firm should continue to produce the output it is producing. 
D) Not enough information is given to say what the firm should do to maximise profit. 
A) to maximise profit the firm should increase output. 
B) to maximise profit the firm should decrease output. 
C) to maximise profit the firm should continue to produce the output it is producing. 
D) Not enough information is given to say what the firm should do to maximise profit.

Question 20

Peet's Coffee and Teas produces some flavourful varieties of Peet's brand coffee.Is Peet's a monopoly?

Accepted Answer

A) Yes,there are no substitutes to Peet's coffee. 
B) No,although Peet's coffee is a unique product,there are many different brands of coffee that are very close substitutes. 
C) Yes,Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. 
D) No,Peet's is not a monopoly because there are many branches of Peet's. 
A) Yes,there are no substitutes to Peet's coffee. 
B) No,although Peet's coffee is a unique product,there are many different brands of coffee that are very close substitutes. 
C) Yes,Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. 
D) No,Peet's is not a monopoly because there are many branches of Peet's.

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Price discrimination is the practice of

What is yield management? How is yield management being used in the airline industry?

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

If price discrimination occurs in a market,

Economic efficiency requires that a natural monopoly's price be

A public franchise

Figure 9-11 Figure 9-11 shows the cost and demand curves for a monopolist. -Refer to Figure 9-11.If the firm maximises its profits,the deadweight loss to society due to this monopoly is equal to the area

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximising outputs?

Price discrimination is a rational strategy for a profit-maximising firm when

a.What is the difference between a horizontal merger and a vertical merger? b.Give an example of each type of merger. c.Could a horizontal merger be welfare improving?

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand,the price in the market segment with more-elastic customer demand will be

A profit-maximising monopoly produces a lower output level than would be produced if the industry was perfectly competitive.

Book publishers use price discrimination routinely,but the form of price discrimination they use is different from the form used by airlines and other industries.Explain.

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25,then

Peet's Coffee and Teas produces some flavourful varieties of Peet's brand coffee.Is Peet's a monopoly?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 9: Monopoly Markets

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Price discrimination is the practice of

What is yield management? How is yield management being used in the airline industry?

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

If price discrimination occurs in a market,

Economic efficiency requires that a natural monopoly's price be

A public franchise

Figure 9-11 Figure 9-11 shows the cost and demand curves for a monopolist. -Refer to Figure 9-11.If the firm maximises its profits,the deadweight loss to society due to this monopoly is equal to the area

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximising outputs?

Price discrimination is a rational strategy for a profit-maximising firm when

a.What is the difference between a horizontal merger and a vertical merger? b.Give an example of each type of merger. c.Could a horizontal merger be welfare improving?

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand,the price in the market segment with more-elastic customer demand will be

A profit-maximising monopoly produces a lower output level than would be produced if the industry was perfectly competitive.

Book publishers use price discrimination routinely,but the form of price discrimination they use is different from the form used by airlines and other industries.Explain.

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25,then

Peet's Coffee and Teas produces some flavourful varieties of Peet's brand coffee.Is Peet's a monopoly?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters