Quiz #6 -- April 15, 2015 -- 2pm!
Use the following to answer question 1.
Figure 9.7
1. (Figure 9.7) The levels of consumer surplus under monopoly and perfect competition are
______ and ______, respectively.
A) $600; $2,000
B) $200; $400
C) $800; $3,200
D) $400; $1,600
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Use the following to answer question 2.
Figure 9.10
2. (Figure 9.10) If the government regulates the price of this natural monopolist to achieve a
perfectly competitive output level, consumer surplus will change from ______ to ______.
A) $3,000; $2,500
B) $15,000; $75,350
C) $5,000; $11,000
D) $17,000; $54,600
3. Which of the following requirements is necessary to practice price discrimination?
I.
II.
III.
IV.
A)
B)
C)
D)
The firm must have market power.
The firm can prevent arbitrage of its product.
The firm faces a perfectly elastic demand curve.
The firm operates in a perfectly competitive industry.
II, III, and IV
I, II, and III
I and II
III and IV
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4. Sparkling Water Co. has determined that the price elasticity of demand for a case of its
purified water by Michigan residents is –3.0, while the price elasticity of demand by
Florida residents is –2.5. Assume that the marginal cost is constant at $8. What price
should Sparking Water Co. charge Michigan and Florida customers?
A) Customers in Michigan and Florida should be charged $16 a case.
B) Michigan customers should be charged $12 a case and Florida customers charged $13.33
a case.
C) Michigan customers should be charged $10 a case and Florida customers charged $14.00
a case.
D) Customers in Michigan and Florida should be charged $13.33 a case.
Use the following to answer question 5.
Figure 10.5
5. (Figure 10.5) Suppose that a firm offers customers either (1) the ability to buy any quantity
they desire for $24 per unit or (2) a price of $18 per unit if purchasing 15 or more units.
Consumer surplus under the quantity discount is ______ than under the $24-per-unit
pricing scheme, so the plan to charge these types of consumers a price of $24 per unit is
______ compatible.
A) $64 more; incentive
B) $32 less; not incentive
C) $53 less; incentive
D) $41 more; not incentive
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Use the following to answer question 6.
Table 10.4
Harry
Stan
Scenario A
Golf
Channel
$10
$10
Mike
Travis
Scenario C
Golf
Channel
$9
$7
History
Channel
$7
$7
History
Channel
$4
$8
Shirley
Alec
Scenario B
Golf
Channel
$12
$8
History
Channel
$15
$10
Amy
Pam
Scenario D
Golf
Channel
$6
$10
History
Channel
$8
$11
6. (Table 10.4) The table shows consumer valuations (maximum willingness to pay per
month) for two cable television networks. In which of the scenarios would a cable television
company experience an increase in producer surplus from using a bundling strategy as
opposed to selling channel access separately?
A) Scenario A
B) Scenario B
C) Scenario C
D) Scenario D
7. A warehouse club has customers with identical demand curves: Q = 100 – 5P, where Q
measures the annual number of merchandise units and P is the price per merchandise unit.
The marginal cost of a merchandise unit is $10. If the warehouse club uses a two-part tariff
strategy, it will earn producer surplus of ______ per customer.
A) $1,060
B) $75
C) $450
D) $250
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8. A Nash equilibrium occurs when:
A) each firm is doing the best it can, conditional on the actions taken by other firms.
B) each firm is doing the worst it can, conditional on the actions taken by other firms.
C) an oligopoly industry is characterized by excess demand, despite a market-clearing
price.
D) an oligopoly industry is characterized by excess supply, despite a market-clearing
price.
Use the following to answer question 9.
Figure 11.1
9. (Figure 11.1) The graph depicts the market demand curve for a two-firm industry. If the
two firms collude and evenly split the market output, how much output will each firm
produce?
A) 400 units
B) 200 units
C) 150 units
D) 300 units
10. Which of the following is NOT a feature of Cournot competition?
A) Firms sell identical products.
B) Firms compete by choosing a quantity to produce.
C) All goods sell at the same price.
D) One firm sets its quantity to produce before the other firm.
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