Download Which of the following is true at the output level where P=MC

Sample Exam 4 for Econ 349
1.Which of
a)
The
b)
The
c)
The
d)
The
the following
monopolist is
monopolist is
monopolist is
monopolist is
is true at the output level where P=MC?
maximizing profit.
not maximizing profit and should increase output.
not maximizing profit and should decrease output.
earning a positive profit.
2. Compared to the equilibrium price and quantity sold in a competitive market,
a monopolist will charge a ______________ price and sell a ______________
quantity.
a)
higher; larger
b)
lower; larger
c)
higher; smaller
d)
lower; smaller
e)
none of these
3. As the manager of a firm you calculate the marginal revenue is $152 and
marginal cost is $200. You should
a)
expand output.
b)
do nothing without information about your fixed costs.
c)
reduce output until marginal revenue equals marginal cost.
d)
expand output until marginal revenue equals zero.
e)
reduce output beyond the level where marginal revenue equals zero.
4. Suppose that a firm can produce its output at either of two plants. If
profits are maximized, which of the following statements is true?
a)
The marginal cost at the first plant must equal marginal revenue.
b)
The marginal cost at the second plant must equal marginal revenue.
c)
The marginal cost at the two plants must be equal.
d)
all of the above.
e)
none of the above.
5. When a per unit tax is imposed on the sale of a product of a monopolist, the
resulting price increase will
a)
always be less than the tax.
b)
always be more than the tax.
c)
always be less than if a similar tax were imposed on firms in a
competitive market.
d)
not always be less than the tax.
6. A monopolist has determined that at the current level of output the price
elasticity of
demand is -0.15.:
a)
The firm should cut output.
b)
This is typical for a monopolist; output should not be altered.
c)
The firm should increase output.
d)
None of the above is necessarily correct.
7. A monopolist has set her level of output to maximize profit. The firm's
marginal revenue is $20 and the price elasticity of demand is -2.0. The firm's
profit maximizing price is approximately:
a)
$0
b)
$20
c)
$40
d)
$10
e)
this problem cannot be answered without knowing the marginal cost.
Use the following information to answer the questions below.
The demand for tickets to the Meatloaf concert (Q) is given as follows:
Q = 120,000 - 2,000P
The marginal revenue is given as:
MR = 60 - .001Q
The stadium at which the concert is planned holds 60,000 people. The marginal
cost of each additional concert goer is essentially zero up to 60,000 fans, but
becomes infinite beyond that point.
8. Given the information above, what is the profit maximizing number of tickets
sold and the price of tickets?
a)
0, $60
b)
20,000, $50
c)
40,000, $40
d)
60,000, $30
e)
80,000, $20
Use the following information to answer the questions below.
The demand for tickets to the Meatloaf concert (Q) is given as follows:
Q = 120,000 - 2,000P
The marginal revenue is given as:
MR = 60 - .001Q
The stadium at which the concert is planned holds 60,000 people. The marginal
cost of each additional concert goer is essentially zero up to 60,000 fans, but
becomes infinite beyond that point.
9. Suppose that the municipal stadium authority imposes a tax of $10 per ticket
on the concert promoters. Given the information above, the profit maximizing
ticket price would
a)
increase by $10.
b)
increase by $5.
c)
not change.
d)
decrease by $5.
e)
decrease by $10.
10. The _____ elastic a firm's demand curve, the greater its _____.
a)
less; monopoly power
b)
less; output
c)
more; monopoly power
d)
more; costs
11. Under which of the following scenarios is it most likely that monopoly power
will be exhibited by firms?
a)
When there are few firms in the market and the demand curve faced by each
firm is highly inelastic.
b)
When there are many firms in the market and the demand curve faced by each
firm is highly inelastic.
c)
When there are few firms in the market and the demand curve faced by each
firm is highly elastic.
d)
When there are many firms in the market and the demand curve faced by each
firm is highly elastic.
12. If
output
a)
b)
c)
d)
the regulatory agency sets a price where AR=AC for a natural monopoly,
will be
equal to the competitive level.
equal to the monopoly profit maximizing level.
greater than the monopoly profit maximizing level and less than the
competitive level.
greater than the competitive level.
13. Which of the following strategies are used by business firms to capture
consumer surplus?
a)
price discrimination.
b)
bundling.
c)
two-part tariffs.
d)
all of the above.
14. 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.
15. A firms sells an identical product to two groups of consumers, A and B. The
firm has decided that third-degree price discrimination is feasible and wishes
to set prices that maximize profits. Which of the following best describes the
price and output strategy that will maximize profits?
a)
PA = PB = MC.
b)
MRA = MRB.
c)
MRA = MRB = MC.
d)
(MRA - MRB) = (1 - MC).
16. 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.
17. Bundling products makes sense for the seller when
a)
consumers have heterogeneous demands.
b)
the products are complementary in nature.
c)
firms cannot price discriminate.
d)
both (a) and (c).
18. Bundling is effective when demands are ____________ and ____________
correlated.
a)
different; negatively
b)
different; positively
c)
similar; negatively
d)
similar; positively
e)
identical; perfectly
19. Which of the following conditions, if present, is sufficient to make a game
cooperative?
a)
Individual payoffs are greater if all players choose the same strategy.
b)
Players can communicate with each other.
c)
Players can negotiate binding contracts committing them to particular
strategies.
d)
Players must agree unanimously on any set of strategies.
e)
The payoff that is highest for all individuals together is also highest
for each individual player.
For the questions below, consider the following game:
.
.
.
.
.
.
.
.
Zport Co.
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
Offer LoÄProfile
Offer
Tires
Sunroof
ÚÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ¿
Moto Corp.
Offer CD Changer³
40, 400
100, 200
³
Offer Free³
³
Maintenance³
0, 300
160, 120
³
ÀÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÙ
20. Which of the following is true for the above game?
a)
Moto's dominant strategy is the CD changer.
b)
Moto's dominant strategy is the free maintenance.
c)
Zport's dominant strategy is the low-profile tires.
d)
Zport's dominant strategy is the sunroof.
e)
Neither company has a dominant strategy.
21. A Nash equilibrium occurs when
a)
each firm is doing the best it
b)
each firm chooses the strategy
c)
a player can choose a strategy
actions.
d)
there is no dominant firm in a
can given its opponents' actions.
that maximizes its minimum gain.
that is optimal regardless of its rivals'
market.
For the questions below, consider the following game:
.
.
.
.
.
.
.
.
Zport Co.
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
Offer LoÄProfile
Offer
Tires
Sunroof
ÚÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ¿
Moto Corp.
Offer CD Changer³
40, 400
100, 200
³
Offer Free³
³
Maintenance³
0, 300
160, 120
³
ÀÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÙ
22. In the above game, equilibrium
a)
is for Moto to offer a CD changer and Zport to offer low-profile tires.
b)
is for Moto to offer a CD changer and Zport to offer a sunroof.
c)
is for Moto to offer free maintenance and Zport to offer low-profile
tires.
d)
is for Moto to offer free maintenance and Zport to offer a sunroof.
e)
does not exist in pure strategies.
For the following questions, consider the game below.
It costs each lakeside firm $1500 per period to use filters
that avoid polluting the lake. However, each firm must use
the lake's water in production, so it is also costly to
have a polluted lake. The cost to each firm of dealing with
water from a polluted lake is $1000 times the number of
polluting firms.
.
Nessie, Corp.
.
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
.
Pollute
Don't Pollute
.
Lago, Inc.
ÚÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ¿
.
Pollute³ -$2,000, -$2,000
-$1,000, -$2,500 ³
.
Don't Pollute³ -$2,500, -$1,000
-$1,500, -$1,500 ³
.
ÀÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÙ
23. The equilibrium of this game, if played only once, is that
a)
both firms pollute.
b)
only Lago pollutes.
c)
only Nessie pollutes.
d)
neither firm pollutes.
e)
the firms choose a mixed strategy.
24. It can be rational to play tit-for-tat in a repeated Prisoners' Dilemma game
a)
only if the game is played an infinite number of times.
b)
if the game is played an infinite number of times, or if it is uncertain
how many times it will be played.
c)
only if the game is played a finite number of times, and that number is
known by all the players in advance.
d)
for n-1 of the n periods it will be played, if n is known in advance.
e)
at no time; tit-for-tat is an irrational strategy in this situation.
3
For the following questions, consider the pricing game below.
.
.
.
.
.
.
Boring Books
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
$70 Econ Books
$25 Econ Books
Simple Texts
ÚÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ¿
$80 Econ Books³ $500, $400
$400, $500 ³
$25 Econ Books³ $100, $0
$50, $100 ³
ÀÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÙ
25. If the firms price simultaneously, equilibrium would be
a)
an $80 price for Simple and a $70 price for Boring.
b)
an $80 price for Simple and a $25 price for Boring.
c)
a $35 price for Simple and a $70 price for Boring.
d)
a $35 price for Simple and a $25 price for Boring.
e)
a mixed strategy equilibrium.