The more block prices a monopoly can set instead of setting a single price, the
A) smaller the deadweight loss.
B) the more producer surplus.
C) the larger the total welfare.
D) All of the above.
D
Purchasing a season pass to the local symphony
A) is an example of first degree price discrimination.
B) is an example of second degree price discrimination.
C) is an example of third degree price discrimination.
D) All of the above.
B
A multimarket price discriminator sells its product in Florida for three times the price it
sets in New York. Assuming the firm faces the same constant marginal cost in each market
and the price elasticity of demand in New York is -2.0, the demand in Flor
C
Suppose all individuals are identical, and their monthly demand for Internet access from a
certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and
q is hours per month. The firm faces a constant marginal cost of $1
D
Suppose all individuals are identical, and their monthly demand for Internet access from a certain
leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per
month. The firm faces a constant marginal cost of $1
A
Adverse selection can occur when
A) all persons involved in a transaction have full information.
B) one person has information not available to others.
C) post-agreement incentives result in workers shirking.
D) nobody has any information about a particul
B
In the automobile insurance market, adverse selection occurs when
A) drivers with greater risks buy a policy with large deductibles.
B) drivers with greater risks buy a policy with no deductibles.
C) uninsured drivers drive recklessly.
D) insured drivers
B
Theatres charge lower prices for a matinee and usually don?t accept coupons for the night
showing of movies because
A) consumers that attend the matinee have a higher price elasticity of demand.
B) consumers that attend the night show have a lower price e
D
At many municipal golf courses, local residents pay a lower fee to play than other golfers do. One
necessary condition for the golf course to be able to successfully price discriminate according to
residency is that
A) they can check the identification ca
A
A perfect-price-discriminating monopoly?s marginal revenue curve
A) lies below the demand curve.
B) is the demand curve.
C) varies for each consumer.
D) is the same as the monopolist?s marginal revenue curve.
B
Assume you have four tickets to a U2 concert. You decide to sell each of them separately on
an auction site such as Ebay. Your auctions represent
B
The more block prices a monopoly can set instead of setting a single price, the
A) smaller the deadweight loss.
B) the more producer surplus.
C) the larger the total welfare.
D) All of the above.
D
If you purchase one pound of apples the price is $1.50 per pound. If you buy a five pound
bag of apples, the cost is $5.00. This is most likely an example of
A
Two-part tariffs offer a mechanism whereby the firm can
A) charge two different prices to distinct groups of customers.
B) collect two times as much from consumers as a single-price monopoly can.
C) capture some or all of the consumer surplus.
D) reduce s
C
Consider the example of used car discussed in class. Suppose buyers value lemon at
$1000 and good used cars at $2000, the reservation price of lemon owners is $750 and the
reservation price of owners of high-quality used car is $1750. The share of current
A
Suppose a car's quality is the owner's private information. For what value of do all the
potential sellers sell their used cars?
A) 40%
B) 35%
C) 30%
D) 20%
D
**A monopoly sells to two different groups to consumers. Its marginal cost of production is $10. The elasticity of demand for group 1 is -1.5 while the elasticity of demand for group 2 is -2.5. If the price paid by group 1 is $15, the price for group 2 is
A
**Which of the following statements about price discrimination is correct?
A) Price discrimination can increase the coverage of a market thereby increasing total welfare.
B) Price discrimination always limits the coverage of a market thereby increasing to
A
**The deadweight loss generated by a perfect-price-discriminating monopoly
A) equals the deadweight loss of a single-price monopoly.
B) is greater than the deadweight loss of a single-price monopoly.
C) equals zero.
D) equals the sum of all lost consumer
C
**A market has many identical consumers, each has the following demand for golf, q = 100 - p, where q is the number of rounds of golf played per year and p is the price per round. The only golf course in an isolated town incurs a marginal cost of $10 per
B - B
**Which of the following statements is correct?
A) A competitive firm's optimal output Q
is determined by MR (Q
)=MC(Q*).
B) The single price charged by monopoly is greater than the marginal cost of the last unit output
C) When monopoly practices perfect
D
Joe and Rita each have some milk and cookies (Milk on the horizontal axis). Joe?s MRS of cookies for milk is 3. Rita?s MRS of cookies for milk is 5. Which of the following statements is TRUE?
A) No gains from trade are possible.
B) Both Rita and Joe can b
B
**If only two people are trading their endowments and no production is possible, then the equilibrium they reach will
A) be on their contract curve.
B) result in unequal marginal rates of substitution for the two people.
C) result in one person being wors
A
**Gains from trade will be possible as long as
A) people have different endowments.
B) people place different values on some goods.
C) marginal rates of substitution are equal across individuals.
D) excess supply equals excess demand.
B
**A charity organization considers giving one thousand dollar to farmers in a village. Which of the following allocation is Pareto efficient?
A) Distribute the money equally among farmers.
B) Give the poorest farmer one thousand dollar. C) Give the riches
D
**If the demand function a monopoly faces is Q = 100 - 2p, and MC is constant at 20, then profit maximization output is
A) 60
B) 20
C) 30
D) 50
A
**This question is a continuation on question 15). Suppose sellers and buyers are equally ignorant about
used cars' qualities. Which of the following statements is correct?
A) All cars are traded in the market place when both parties believe 90% of used c
A
**The ability of a monopoly to charge a price that exceeds marginal cost depends on
A) price elasticity of supply.
B) price elasticity of demand.
C) shape of the marginal cost curve.
D) none of the above.
B
**If a bank offers mortgages which do not require the normal 20% down payment, the bank encourages
A) People who know they might not pay off the mortgage.
B) People who know that they are going to pay off the mortgage.
C) People who know they can?t pay of
A
**A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the demand elasticity is
A) -0.2.
B) -0.8.
C) -1.25.
D) -5.0.
C
**When a firm has a monopoly in a market and also perfectly price discriminates, total welfare
A) is maximized.
B) is lower than in a perfectly competitive market.
C) is higher than in a perfectly competitive market.
D) is zero.
A
**Which of the following total cost functions suggests the presence of a natural monopoly?
A) TC(Q) = 3Q^3
B) TC(Q) = 100Q + 2Q^2
C) TC(Q) = 200Q
D) TC(Q) = 300 + Q
D
**The inverse demand function facing a monopoly is P=100-Q/2. The monopoly's marginal cost is constant at 60. Suppose the government wishes to eliminate the deadweight loss by controlling the price. What is the price ceiling the government should set?
A)
A - B
**Adverse selection occurs when
A) a person is selfish.
B) a person buys life insurance because he has a risky lifestyle that is not known to the life insurance
company.
C) a person is a risk lover.
D) A women makes more doctor visits than before when she
B
**Monopoly results in a deadweight loss because
A) the monopolist makes a positive economic profit.
B) The monopolist wishes to maximize profit.
C) Marginal consumer's willingness to pay is larger than marginal cost of the last unit output.
D) Marginal co
C
**The introduction of satellite television systems would cause the Lerner Index for cable television to
A) become smaller.
B) increase.
C) change in accordance to the increase in market power of cable TV providers.
D) be unchanged.
A
**If the demand for a firm?s output is perfectly elastic, then the firm?s Lerner Index equals
A) zero.
B) one.
C) infinity.
D) one-half.
A