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ALL Government BLACKBOARD SITES > ECON 101-2 INTRODUCTORY MICROECONOMIC (FALL 2007 - BURKHAUSER) > ASSIGNMENTS > REVIEW ASSESSMENT: PROBLEM SET #10 Review Assessment: Problem Set #10 Name: Status : Score: Problem Set #10 Completed 65 out of 100 points Instructions: Further instructions on how to complete online problem sets can be found in then Problem Set Guide in the Course Information area. Question 1 Multiple Choice 5 of 5 points When individuals are damaged by an illegal arrangement to restrain trade, which law allows them to pursue civil action and recover up to three times the damages sustained? Selected Answer: Correct Answer: Question 2 Multiple Choice The practice of tying is used to Selected Answer: Correct Answer: package products to sell at a combined price closer to a buyer's total willingness to pay. package products to sell at a combined price closer to a buyer's total willingness to pay. 5 of 5 points Clayton Act Clayton Act 5 of 5 points Question 3 Multiple Choice Which of the following is necessarily a problem with antitrust laws? Selected Answer: Correct Answer: They may target a business whose practices appear to be anticompetitive but in fact have legitimate purposes. They may target a business whose practices appear to be anticompetitive but in fact have legitimate purposes. 5 of 5 points Question 4 Multiple Choice An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much additional profit can the firm earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket? Selected Answer: Correct Answer: Question 5 Multiple Choice $15,000 $15,000 0 of 5 points Which of the following statements comparing monopoly with competition is correct? Selected Answer: The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist; competitive firms do not earn a positive economic profit so there is no deadweight loss under competition. With perfect price discrimination, the total surplus under monopoly can be the same as under competition. 5 of 5 points Correct Answer: Question 6 Multiple Choice A perfectly price-discriminating monopolist is able to Selected Answer: Correct Answer: Question 7 Multiple Choice Antitrust laws may Selected Answer: Correct Answer: Question 8 Multiple Choice The economic inefficiency of a monopolist can be measured by the Selected Answer: Correct Answer: Question 9 Multiple Choice deadweight loss. deadweight loss. restrict the ability of firms to merge. restrict the ability of firms to merge. maximize profit and produce a socially-optimal level of output. maximize profit and produce a socially-optimal level of output. 5 of 5 points 5 of 5 points 5 of 5 points 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. COSTS Quantit Produced Total Cost ($) Marginal Cost Quantity Demanded REVENUES Price ($/unit) Total Revenue Marginal Revenue 0 1 2 3 4 5 6 7 8 100 140 184 230 280 335 395 475 565 -- 0 1 2 3 4 5 6 7 8 170 160 150 140 130 120 110 100 90 -- Refer to Table 15-2. What is the marginal cost of the 8th shirt? Selected Answer: Correct Answer: Question 10 Multiple Choice Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. COSTS Quantit Produced Total Cost ($) Marginal Cost Quantity Demanded $90 $90 5 of 5 points REVENUES Price ($/unit) Total Revenue Marginal Revenue 0 1 2 3 4 5 6 7 100 140 184 230 280 335 395 475 -- 0 1 2 3 4 5 6 7 170 160 150 140 130 120 110 100 -- 8 565 8 90 Refer to Table 15-2. What is the marginal cost of the 6th shirt? Selected Answer: Correct Answer: Question 11 Multiple Choice Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm. $60 $60 5 of 5 points Refer to Figure 15-2. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to Selected Answer: Correct Answer: Question 12 Multiple Choice Table 15-4 Q2. Q2. 5 of 5 points Consider the following demand and cost information for a monopoly. Quantity 0 1 2 3 4 Price $30 $25 $20 $15 $10 Total Cost $3 $7 $12 $18 $25 Refer to Table 15-4. The maximum profit this monopolist can earn is Selected Answer: Correct Answer: Question 13 Multiple Choice $28 $28 0 of 5 points What is the monopolist's profit under the following conditions? The profitmaximizing price charged for goods produced is $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. Selected Answer: Correct Answer: Question 14 Multiple Choice Table 16-14 B A Q=2 Q=3 Q=2 (10, 10) (12, 8) Q=3 (8, 12) (6, 6) $105 Not enough information is given to determine the answer. 0 of 5 points Refer to Table 16-14. This table shows a game played between two firms, A and B. In this game each firm must decide how much output to produce. The profit for each firm is given in the table as (Profit for A, Profit for B). In this game Selected Register to View Answerhas a dominant strategy, but B does not have a dominant strategy. Correct Answer: Question 15 Multiple Choice neither player has a dominant strategy. 5 of 5 points The profit-maximizing price for a monopoly is a price that Selected Answer: Correct Answer: Question 16 Multiple Choice exceeds marginal cost. exceeds marginal cost. 0 of 5 points Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it Selected Answer: Correct Answer: Question 17 Multiple Choice is always in their best interest to supply less to the market. is always in their best interest to leave their quantities supplied unchanged. 0 of 5 points If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to lower production with the aim of Selected Answer: Correct Answer: Question 18 Multiple Choice increasing profits for the group of firms as a whole. None of the above is correct. 5 of 5 points Individual profit earned by Dave, the oligopolist, depends on which of the following? (i)The quantity of output that Dave produces (ii)The quantities of output that the other firms in the market produce (iii)The extent of collusion between Dave and the other firms in the market Selected Answer: Correct Answer: Question 19 Multiple Choice Table 16-17 Amy and Heather are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each (i), (ii), and (iii) (i), (ii), and (iii) 0 of 5 points make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below. The payoffs in each cell are shown as (Amy, Heather). Heather Clean Don't Clean (75, 75) (15, 100) (100, 15) (20, 20) Amy Clean Don't Clean Refer to Table 16-17. What is Amy's dominant strategy? Selected Answer: Correct Answer: Question 20 Multiple Choice In a prisoners' dilemma game, Selected Answer: Correct Answer: repeated play will always result in a better outcome for both players than when the game is played only once. if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they play the game only once. Amy should always choose Clean. Amy should always choose Don't Clean. 0 of 5 points ALL BLACKBOARD SITES > ECON 101-2 INTRODUCTORY MICROECONOMIC (FALL 2007 - BURKHAUSER) > ASSIGNMENTS > REVIEW ASSESSMENT: PROBLEM SET #10 Review Assessment: Problem Set #10 Name: Status : Score: Problem Set #10 Completed 65 out of 100 points Instructions: Further instructions on how to complete online problem sets can be found in then Problem Set Guide in the Course Information area. Question 1 Multiple Choice 5 of 5 points When individuals are damaged by an illegal arrangement to restrain trade, which law allows them to pursue civil action and recover up to three times the damages sustained? Selected Answer: Correct Answer: Question 2 Multiple Choice Clayton Act Clayton Act 5 of 5 points The practice of tying is used to Selected Answer: Correct Answer: package products to sell at a combined price closer to a buyer's total willingness to pay. package products to sell at a combined price closer to a buyer's total willingness to pay. 5 of 5 points Question 3 Multiple Choice Which of the following is necessarily a problem with antitrust laws? Selected Answer: Correct Answer: They may target a business whose practices appear to be anticompetitive but in fact have legitimate purposes. They may target a business whose practices appear to be anticompetitive but in fact have legitimate purposes. 5 of 5 points Question 4 Multiple Choice An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much additional profit can the firm earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket? Selected Answer: Correct Answer: Question 5 Multiple Choice $15,000 $15,000 0 of 5 points Which of the following statements comparing monopoly with competition is correct? Selected Answer: The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist; competitive firms do not earn a positive economic profit so there is no deadweight loss under competition. Correct Answer: With perfect price discrimination, the total surplus under monopoly can be the same as under competition. 5 of 5 points Question 6 Multiple Choice A perfectly price-discriminating monopolist is able to Selected Answer: Correct Answer: Question 7 Multiple Choice Antitrust laws may Selected Answer: Correct Answer: Question 8 Multiple Choice The economic inefficiency of a monopolist can be measured by the Selected Answer: Correct Answer: Question 9 Multiple Choice Table 15-2 deadweight loss. deadweight loss. restrict the ability of firms to merge. restrict the ability of firms to merge. maximize profit and produce a socially-optimal level of output. maximize profit and produce a socially-optimal level of output. 5 of 5 points 5 of 5 points 5 of 5 points Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. COSTS Quantit Produced Total Cost ($) Marginal Cost Quantity Demanded REVENUES Price ($/unit) Total Revenue Marginal Revenue 0 1 2 3 4 5 6 7 100 140 184 230 280 335 395 475 -- 0 1 2 3 4 5 6 7 170 160 150 140 130 120 110 100 -- 8 565 8 90 Refer to Table 15-2. What is the marginal cost of the 8th shirt? Selected Answer: Correct Answer: Question 10 Multiple Choice Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. COSTS Quantit Produced Total Cost ($) Marginal Cost Quantity Demanded $90 $90 5 of 5 points REVENUES Price ($/unit) Total Revenue Marginal Revenue 0 1 2 3 4 5 6 7 8 100 140 184 230 280 335 395 475 565 -- 0 1 2 3 4 5 6 7 8 170 160 150 140 130 120 110 100 90 -- Refer to Table 15-2. What is the marginal cost of the 6th shirt? Selected Answer: Correct Answer: Question 11 Multiple Choice Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm. $60 $60 5 of 5 points Refer to Figure 15-2. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to Selected Answer: Correct Answer: Question 12 Multiple Choice Table 15-4 Consider the following demand and cost information for a monopoly. Quantity 0 1 2 3 4 Price $30 $25 $20 $15 $10 Total Cost $3 $7 $12 $18 $25 Q2. Q2. 5 of 5 points Refer to Table 15-4. The maximum profit this can earn is Selected Answer: Correct Answer: $28 $28 Question 13 Multiple Choice 0 of 5 points What is the monopolist's profit under the following conditions? The profitmaximizing price charged for goods produced is $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. Selected Answer: Correct Answer: Question 14 Multiple Choice Table 16-14 B A Q=2 Q=3 Q=2 (10, 10) (12, 8) Q=3 (8, 12) (6, 6) $105 Not enough information is given to determine the answer. 0 of 5 points Refer to Table 16-14. This table shows a game played between two firms, A and B. In this game each firm must decide how much output to produce. The profit for each firm is given in the table as (Profit for A, Profit for B). In this game Selected Answer: Correct Answer: Question 15 Multiple Choice The profit-maximizing price for a monopoly is a price that Selected Answer: Correct Answer: Question 16 Multiple Choice exceeds marginal cost. exceeds marginal cost. 0 of 5 points A has a dominant strategy, but B does not have a dominant strategy. neither player has a dominant strategy. 5 of 5 points Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it Selected Answer: Correct is always in their best interest to supply less to the market. is always in their best interest to leave their quantities supplied Answer: Question 17 Multiple Choice unchanged. 0 of 5 points If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to lower production with the aim of Selected Answer: Correct Answer: Question 18 Multiple Choice increasing profits for the group of firms as a whole. None of the above is correct. 5 of 5 points Individual profit earned by Dave, the oligopolist, depends on which of the following? (i)The quantity of output that Dave produces (ii)The quantities of output that the other firms in the market produce (iii)The extent of collusion between Dave and the other firms in the market Selected Answer: Correct Answer: Question 19 Multiple Choice Table 16-17 Amy and Heather are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below. The payoffs in each cell are shown as (Amy, Heather). Heather Clean Don't Clean (75, 75) (15, 100) (100, 15) (20, 20) (i), (ii), and (iii) (i), (ii), and (iii) 0 of 5 points Amy Clean Don't Clean Refer to Table 16-17. What is Amy's dominant strategy? Selected Answer: Correct Answer: Question 20 Multiple Choice Amy should always choose Clean. Amy should always choose Don't Clean. 0 of 5 points In a prisoners' dilemma game, Selected Answer: Correct Answer: repeated play will always result in a better outcome for both players than when the game is played only once. if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they play the game only once. ALL BLACKBOARD SITES > ECON 101-2 INTRODUCTORY MICROECONOMIC (FALL 2007 - BURKHAUSER) > ASSIGNMENTS > TAKE ASSESSMENT MAKEUP PS #10 Take Assessment Makeup PS #10 Name: Instructions: Makeup PS #10 Multiple Attempts: This Test allows multiple attempts. Force Completion: This Test can be saved and resumed later. Question 1 Multiple Choice In theory, price discrimination decreases the monopolist's profits. decreases consumer surplus. increases deadweight loss. reduces the number of consumers who purchase the monopoly's product. Question 2 Multiple Choice Scenario 15-3 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to of all the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 5 points 5 points 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. Refer to Scenario 15-3. If Black Box Cable TV is able to price discriminate, what would be the maximum amount of profit it could generate? $500,000 $600,000 $850,000 $925,000 Question 3 Multiple Choice 5 points Which of the following can eliminate the inefficiency inherent in monopoly pricing? Arbitrage Cost-plus pricing Price discrimination Regulations that force monopolies to reduce their levels of output Question 4 Multiple Choice Table 15-5 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher's is able to engage in perfect price discrimination. COSTS Quantity Produced Total Cost ($) Marginal Cost Quantity Demanded 5 points REVENUES Price ($) Total Revenue Marginal Revenue 0 1 2 3 4 5 6 7 8 100 140 184 230 280 335 395 475 575 -- 0 1 2 3 4 5 6 7 8 170 160 150 140 130 120 110 100 95 -- Refer to Table 15-5. What is the average revenue when 7 shirts are sold? $90 $100 $110 $130 Question 5 Multiple Choice 5 points Assume that Apple Computer has entered into an enforceable resale price maintenance agreement with Computer Super Stores Inc. (CSS Inc.) and Wal-Mart. Which of the following will always be true? The wholesale price of Apple computers will be different for CSS Inc. than it is for Wal-Mart. Wal-Mart will benefit from customers who go to CSS Inc. for information about different computers. CSS Inc. will sell Apple computers at a lower price than Wal-Mart. Wal-Mart and CSS Inc. will always sell Apple Computers for exactly the same price. Question 6 Multiple Choice The primary purpose of antitrust legislation is to protect small businesses. protect the competitiveness of U.S. markets. protect the prices of American-made products. ensure firms earn only a fair profit. Question 7 Multiple Choice 5 points 5 points Which government entity is charged with investigating and enforcing antitrust laws? The U.S. Justice Department The U.S. Commerce Department The U.S. Treasury Department The Bureau of Alcohol, Tobacco, and Firearms Question 8 Multiple Choice The social cost of a single-price monopoly is equal to its economic profit. fixed cost. dead weight loss. variable cost. Question 9 Multiple Choice Scenario 15-1 Consider a transportation corporation named C.R. Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest. Currently, there are plenty of seats on the subway, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of C.R. Evans experienced incredible rates of return on their investment, due to the profitability of the corporation. 5 points 5 points Refer to Scenario 15-1. C.R. Evans will continue to be a monopolist in the subway transportation industry only if population growth leads to an overcrowding of the subway cars. there are no new entrants to the market. demand for transportation services decreases. All of the above are correct. Question 10 Multiple Choice 5 points Which of the following is an example of a barrier to entry? (i)A key resource is owned by a single firm. (ii)The costs of production make a single producer more efficient than a large number of producers. (iii)The government has given the existing monopoly the exclusive right to produce the good. (i) and (ii) (ii) and (iii) (i) only All of the above are examples of barriers to entry. Question 11 Multiple Choice A monopolist produces more than the socially efficient quantity of output, but at a higher price than in a competitive market. less than the socially efficient quantity of output, but at a higher price than in a competitive market. the socially efficient quantity of output, but at a higher price than in a competitive market. possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitive market. Question 12 Multiple Choice If a monopoly lowers its price, its total revenue must increase. total revenue must decrease. marginal revenue must increase. marginal revenue must decrease. Question 13 Multiple Choice Figure 15-6 5 points 5 points 5 points Refer to Figure 15-6. The deadweight loss caused by a profit-maximizing monopoly amounts to $150. $200. $250. $300. Question 14 Multiple Choice As the number of firms in an oligopoly increases, the price approaches zero. marginal cost. infinity. the monopoly price. Question 15 Multiple Choice Scenario 16-4 Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $50 million each. If they both advertise, they again split the market, but profits are lower by $10 million since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that advertises earns $60 million while the company that does not advertise earns only $30 million. 5 points 5 points Refer to Scenario 16-4. What is PM Inc.'s dominant strategy? To refrain from advertising regardless of whether Brown Inc. advertises To advertise only if Brown Inc. advertises To advertise only if Brown Inc. does not advertise To advertise regardless of whether Brown Inc. advertises Question 16 Multiple Choice 5 points An equilibrium in which each firm in an oligopoly maximizes profit, given the actions of its rivals, is called a general equilibrium. a dominant equilibrium. a Nash equilibrium. an oligopoly equilibrium. Question 17 Multiple Choice Table 16-11 B A Up Down Right (2, 2) (1, 3) Left (3, 1) (0, 0) 5 points Refer to Table 16-11. This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). Which outcome is the Nash equilibrium in this game? Up-Right Up-Left Down-Right Down-Left Question 18 Multiple Choice 5 points After initial success, the OPEC cartel saw the price of oil and the revenues of its members decline due, in part, to the low elasticity of demand for oil in the short run. the large number of buyers from each member nation. surging demand for oil in the early 1980s. OPEC members not producing their agreed upon production levels. Question 19 Multiple Choice 5 points When firms have agreements among themselves on the quantity to produce and the price at which to sell output, we refer to their form of organization as a Nash arrangement. cartel. monopolistically competitive oligopoly. perfectly competitive oligopoly. Question 20 Multiple Choice Table 16-16 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2). Store 2 Store 1 Low Price High Price Low Price (500, 500) (100, 800) High Price (800, 100) (650, 650) 5 points Refer to Table 16-16. If grocery store 1 sets a low price, what price should grocery store 2 set? And what will grocery store 2's payoff equal? Low price, $500 High price, $800 Low price, $100 High price, $650 ALL BLACKBOARD SITES > ECON 101-2 INTRODUCTORY MICROECONOMIC (FALL 2007 - BURKHAUSER) > ASSIGNMENTS > TAKE ASSESSMENT MAKEUP PS #10 Take Assessment Makeup PS #10 Name: Instructions: Makeup PS #10 Multiple Attempts: This Test allows multiple attempts. Force Completion: This Test can be saved and resumed later. Question 1 Multiple Choice Games that are played more than once generally lead to outcomes dominated purely by self-interest. lead to outcomes that do not reflect joint rationality. encourage cheating on cartel production quotas. make collusive arrangements easier to enforce. Question 2 Multiple Choice In game theory, a Nash equilibrium is an outcome in which each player is doing their best given the strategies chosen by the other players. an outcome in which no player wishes to change their chosen strategy given the strategies chosen by the other players. the outcome that occurs when all players have a dominant strategy. All of the above. Question 3 Multiple Choice 5 points 5 points 5 points When firms are faced with making strategic choices in order to maximize profit, economists typically use the theory of monopoly to model their behavior. the theory of aggressive competition to model their behavior. game theory to model their behavior. cartel theory to model their behavior. Question 4 Multiple Choice Scenario 16-4 Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $50 million each. If they 5 points both advertise, they again split the market, but profits are lower by $10 million since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that advertises earns $60 million while the company that does not advertise earns only $30 million. Refer to Scenario 16-4. In 1971, Congress passed a law that banned cigarette advertising on television. If cigarette companies are profit maximizers, it is likely that neither company opposed the ban on advertising. Brown Inc. sued the federal government on grounds that the ban constitutes a civil rights violation. both companies sued the federal government on grounds that the ban constitutes a civil rights violation. both companies retaliated with black-market operations. Question 5 Multiple Choice Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for four industries. Firm 1 2 3 4 5 6 Total Industry A 13,250 10,975 8,175 4,275 1,250 875 45,350 Industry B 8,750 7,500 6,400 5,000 4,250 4,000 70,900 Industry C 1,750 1,725 1,700 1,675 1,650 1,625 30,125 Industry D 15,000 14,000 13,000 12,000 11,000 10,000 120,000 5 points Refer to Table 16-2. What is the concentration ratio for Industry D? 13% 35% 45% 63% Question 6 Multiple Choice The typical firm in the U. S. economy has some degree of market power. sells its product for a price that is equal to the marginal cost of producing the last unit. is perfectly competitive. is a monopoly. Question 7 Multiple Choice Table 16-16 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2). Store 2 Store 1 Low Price High Price Low Price (500, 500) (100, 800) High Price (800, 100) (650, 650) 5 points 5 points Refer to Table 16-16. What is grocery store 1's dominant strategy? Grocery store 1 does not have a dominant strategy. Grocery store 1 should always set a low price. Grocery store 1 should always set a high price. Grocery store 1 should set a low price when grocery store 2 sets a low price, and grocery store 1 should set a high price when grocery store 2 sets a high price. Question 8 Multiple Choice The social cost of a single-price monopoly is equal to its economic profit. 5 points fixed cost. dead weight loss. variable cost. Question 9 Multiple Choice Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. COSTS Quantit Produced Total Cost ($) Marginal Cost Quantity Demanded 5 points REVENUES Price ($/unit) Total Revenue Marginal Revenue 0 1 2 3 4 5 6 7 8 100 140 184 230 280 335 395 475 565 -- 0 1 2 3 4 5 6 7 8 170 160 150 140 130 120 110 100 90 -- Refer to Table 15-2. What are Dreher's Designer Shirt Company's fixed costs? $0 $100 $600 $745 Question 10 Multiple Choice Scenario 15-2 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. 5 points Refer to Scenario 15-2. The firm's profit-maximizing price is $30. between $30 and $34. between $34 and $60. $60. Question 11 Multiple Choice Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. COSTS Quantit Produced Total Cost ($) Marginal Cost Quantity Demanded 5 points REVENUES Price ($/unit) Total Revenue Marginal Revenue 0 1 2 3 4 5 6 7 8 100 140 184 230 280 335 395 475 565 -- 0 1 2 3 4 5 6 7 8 170 160 150 140 130 120 110 100 90 -- Refer to Table 15-2. What is the total revenue from selling 8 shirts? $90 $695 $720 $800 Question 12 Multiple Choice 5 points The following table shows quantity, price, and marginal cost information for a monopoly. What price should the firm charge to maximize its profit? Q P MC 0 1 2 3 4 5 6 $4 $5 $6 $7 Question 13 Multiple Choice 10 9 8 7 6 5 4 -3 4 5 6 7 8 5 points The defining characteristic of a natural monopoly is constant marginal cost over the relevant range of output. economies of scale over the relevant range of output. constant returns to scale over the relevant range of output. diseconomies of scale over the relevant range of output. Question 14 Multiple Choice Antitrust laws in general are used to prevent oligopolists from acting in ways that make markets less competitive. encourage oligopolists to pursue cooperative-interest at the expense of selfinterest. encourage frivolous lawsuits among competitive firms. encourage all firms to cut production levels and cut prices. Question 15 Multiple Choice 5 points 5 points Consider a market served by a monopolist, Firm A. A new firm, Firm B, enters the market and, as a result, Firm A lowers its price to try to drive Firm B out of the market. This practice is known as resale price maintenance. predatory tying. tying. predatory pricing. Question 16 Multiple Choice 5 points If Levi Strauss & Co. were to require every retailer that carried its clothing to charge customers $42 for each pair of jeans, Levi Strauss & Co. would be practicing resale price maintenance. fixed retail pricing. tying. cost plus pricing. Question 17 Multiple Choice 5 points When a monopolist is able to sell its product at different prices, it is engaging in distribution pricing. quality-adjusted pricing. price differentiation. price discrimination. Question 18 Multiple Choice Table 15-5 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher's is able to engage in perfect price discrimination. COSTS Quantity Produced Total Cost ($) Marginal Cost Quantity Demanded 5 points REVENUES Price ($) Total Revenue Marginal Revenue 0 1 2 3 4 5 100 140 184 230 280 335 -- 0 1 2 3 4 5 170 160 150 140 130 120 -- 6 7 8 395 475 575 6 7 8 110 100 95 Refer to Table 15-5. What are Dreher's Designer Shirt Company's fixed costs? $100 $150 $354 $654 Question 19 Multiple Choice 5 points If one were to compare a competitive market to a monopoly that engages in perfect price discrimination, one could say that in both cases, total social welfare is the same. total social welfare is higher in the competitive market than with the perfectly price discriminating monopoly. in both cases, some potentially mutually beneficial trades do not occur. consumer surplus is the same in both cases. Question 20 Multiple Choice With perfect price discrimination the monopoly eliminates all price discrimination by charging each customer the same price. the monopoly charges each customer an amount equal to the monopolist's marginal cost of production. the deadweight loss from monopoly is eliminated. consumer surplus is gained as monopoly profits are eliminated. 5 points ... View Full Document

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