Impact on the optimal production strategy of

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 impact on the optimal production strategy of Dogonomics  because fixed costs have no impact on MC.  F       Marginal revenue will have  ½  the slope of the demand.  F     5.  Assume the following profile for three consumers and one firm selling both Widgets and  Gadgets where MC=2 for each item. Treat each question as independent from the previous  questions.                           Reservation prices Widgets Gadgets Bart 5 1.5 Lisa 3 3 Homer 1 4.5 True     False         If all prices were set at $2.50 each then profit would equal $2.  T 5
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        If the firm adopted the strategy of pure bundling then it could set  the price of a bundle of one widget and one gadget at $5.50 and increase profit  over not bundling.  T         The best pure bundling strategy and the best no-bundling strategy  yield an equal profit.  F         Mixed bundling will lead to no greater profit for the firm than pure bundling.  F 6. Answer the following questions on price discrimination. True     False       Cheap matinee tickets for movies are an example of peak-load pricing.  T         If MC=0 there can still be gains from mixed bundling relative to pure  bundling.  T           Marginal profit under perfect price discrimination equals P-AC.  F         A price-taking firm can use price discrimination to increase  producer surplus.  F 7. In competitive markets: True     False       Firms equate marginal cost to marginal revenue.  T        There are no barriers to entry and exit   T         Goods are homogeneous    T         Market demand is always perfectly elastic    F 6
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8. Assume that a particular industry is a constant–cost perfectly competitive industry.  Suppose that a sudden and permanent shock to demand causes existing firms to experience  losses.  Then in the long run: True     False       Some existing firms will exit the market   T        The eventual long run equilibrium price will be higher than the  current short run equilibrium price.   T         Each surviving firm produces more in the long run than it is  currently producing.     T         Total aggregate output in the industry will be greater in the long  run than it currently is in the short run.   F 9. Regarding consumer surplus: True     False       Consumer surplus is the area above the supply curve and below  the demand curve.    F         Captures the consumer benefits from the existence of a market. 
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  • Spring '09
  • Brian
  • Marginal product, The Profit, perfect price discrimination, Ratna Shrestha Ratna Shrestha Stephen Meyer Ralph Winter Ratna Shrestha Timothy Beatty, two­part tariff

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