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3. Some grocery stores are now offering customers coupons which entitle
them to a discount on certain items on their next visit when they go
through the check-out line. This practice is called:
a. intertemporal price discrimination.
b. third degree price discrimination.
c. two-part tariff.
d. bundling.
e. none of the above.
7. The situation in which buyers are able to affect the price of a good is
referred to as ______________ power.
a. monopoly
b. purchasing
c. monopsony
d. countervailing
10. If a monopolist sets her output such that marginal revenue, marginal
cost and average total cost are equal, economic profit must be:
a. negative.
b. positive.
c. zero.
d. indeterminate from the given information.
12. A tennis pro charges $15 per hour for tennis lessons for children, and
$30 per hour for tennis lessons for adults. The tennis pro is practicing
a. first-degree price discrimination.
b. second-degree price discrimination.
c. third-degree price discrimination.
d. fourth-degree price discrimination.
e. fifth-degree price discrimination.
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15. When people pay a monthly fee to have a hookup to the telephone
company's line plus a fee for each call actually made, we would say that
the telephone company is using
a. limit pricing.
b. a two-part tariff.
c. second-degree price discrimination.
d. two stage price discrimination.
20. The marginal cost of a monopolist is constant and is $10. The marginal
revenue curve is given as follows:
MR = 100 - 2Q
21. Relative to the Nash equilibrium in the Cournot model, the Nash
equilibrium in the Bertrand model with homogeneous products
a. results in the same output but a higher price.
b. results in the same output but a lower price.
c. results in a larger output at a lower price.
d. results in a smaller output at a higher price.
e. any of the above may result.
23. A local restaurant offers "early bird" price discounts for dinners
ordered from 4:30 to 6:30 PM. This is an example of
a. peak-load pricing.
b. second-degree price discrimination.
c. a two-part tariff.
d. tying.
e. none of the above.
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The marginal value curve and expenditure curves in the diagram below are
those of a monopsony.
25. When a drug company develops a new drug it is granted a _____ making it
illegal for other firms to enter the market until the _____ expires.
a. franchise; franchise
b. copyright; copyright
c. government license; government license
d. patent; patent
26. Rather than charging a single price to all customers, a firm charges a
higher price to men and a lower price to women. By engaging in this
practice, the firm:
a. is trying to reduce its costs and therefore increase its profit.
b. is engaging in an illegal activity that is prohibited by the Sherman
Antitrust Act.
c. is attempting to convert producer surplus into consumer surplus.
d. is attempting to convert consumer surplus into producer surplus.
e. both (a) and (c) are correct.
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27. McDonald's restaurant located near the high school offered a Tuesday
special for high school students. If high school students showed their
student ID cards, they would be given 50 cents off any special meal.
This practice is an example of:
a. collusion.
b. price discrimination.
c. two-part tariff.
d. bundling.
e. tying.
30. An electric power company uses block pricing for electricity sales.
Block pricing is an example of
a. first-degree price discrimination.
b. second-degree price discrimination.
c. third-degree price discrimination.
d. Block pricing is not a type of price discrimination.
31. Which of the following is true at the output level where P=MC?
a. The monopolist is maximizing profit.
b. The monopolist is not maximizing profit and should increase output.
c. The monopolist is not maximizing profit and should decrease output.
d. The monopolist is earning a positive profit.
32. Bundling raises higher revenues than selling the goods separately when
a. demands for two goods are highly positively correlated.
b. demands for two products are mildly positively correlated.
c. demands for two products are negatively correlated.
d. there is a perfect positive correlation between the demands for two
goods.
e. the goods are complementary in nature.
36. To find the profit maximizing level of output, a firm finds the output
level where
a. price equals marginal cost.
b. marginal revenue and average total cost.
c. price equals marginal revenue.
d. all of the above.
e. none of the above.
Suppose mountain spring water can be produced at no cost and that the demand
and marginal revenue curves for mountain spring water are given as follows:
37. What will be the price in the long run if the industry is a Cournot
duopoly?
a. $400
b. $600
c. $800
d. $900
e. Competition will drive the price to zero.
A monopolist faces the following demand curve, marginal revenue curve, total
cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
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39. Suppose that a tax of $5 for each unit produced is imposed by state
government. What is the profit maximizing level of output?
a. 0
b. 90
c. 95
d. 100
e. none of the above
P = 30 - Q
41. What price would this new drink sell for if it sold in a competitive
market?
a. 0
b. $3
c. $13.50
d. $16.50
e. $27
43. What will be the price of this new drink in the long run if the industry
is a Bertrand duopoly?
a. $3
b. $9
c. $12
d. $13.50
e. none of the above
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44. A situation in which each firm is doing the best it can, given what its
rivals are doing is called a
a. Nash equilibrium.
b. Cooperative equilibrium.
c. Stackelberg equilibrium
d. zero sum game.
45. After the policy was implemented, the quantity traded became
a. 1000.
b. 2000.
c. 3000.
d. 4000.
e. between 2000 and 4000, but the amount depends upon producers'
reactions, which are uncertain.
1. d
2. c
3. b
4. d
5. d
6. b
7. c
8. a
9. a
10. b
11. a
12. c
13. b
14. b
15. b
16. a
17. b
18. c
19. b
20. d
21. c
22. c
23. a
24. c
25. d
26. d
27. b
28. d
29. b
30. b
31. c
32. c
33. d
34. b
35. b
36. e
37. a
38. e
39. b
40. b
41. b
42. d
43. a
44. a
45. b
46. b
47. c
48. d