1 Companies with market power usually prefer to implement price discrimination because

Select one:

a.most business owners succumb to subconscious forms of racism that result in different prices to different customers, ultimately reducing their overall profit.

b.their market power makes them complacent and lazy; it is actually less profitable to utilize price discrimination among consumers with different demands than it is to charge a single price to all.

c.charging different prices to people based on their individual demand yields more profit.

d.it is simpler and more efficient to charge a uniform price than to figure out dozens or thousands of different customers' demands.

2 Which is an example of a firm that is price discriminating?

Select one:

a.A firm negotiates a lower price for an input by pitting two wholesale suppliers against each other.

b.A firm sells two products separately in one market but bundles those two into a single product in another market that has nearly identical demographic characteristics.

c.A firm experiences significant cost differences in providing products to two different markets and thus sets different prices accordingly.

d.A firm has comparable costs in two different areas but charges different prices based on demand.

3 A firm would not be able to price discriminate if

Select one:

a.it had consumers with different demands that had easily identifiable and distinguishing characteristics.

b.it had an usually high degree of market power.

c.there was a significant difference in demand between two different sets of consumers.

d.there were resale opportunities between the consumers in the different markets.

4 First-degree price discrimination results in maximum profit, but is often not utilized because

Select one:

a.competition from other firms results in demand curves being horizontal and equivalent to

ATCcurves.

b.a firm would not want to operate in a manner similar to a monopoly.

c.the information and negotiation costs in dealing with each individual customer are very expensive.

d.since they are used to single prices being charged in most markets, consumers do not differ in their demands.

5 A news magazine offers students a discount on the regular subscription rate.The total number of subscriptions is optimal, and, at the current prices, the marginal revenue from the last subscription sold to a student is $6, while the marginal revenue from the last subscription sold to a regular customer is $10.In order to maximize profit, the magazine should

Select one:

a.offer all customers the same discount received by the students.

b.offer students a higher discount (lower the price to students).

c.stop offering students a discount on the regular subscription rate.

d.offer students a lower discount (raise the price to students).

6 A firm is producing two goods (XandY) that are related in consumption. The demand function for

Xis:

=38000.5+1.3

QDX=38000.5PX+1.3PY

Which of the following pairs of goods might the firm be producing?

Select one:

a.paper towels and tennis balls

b.shampoo and conditioner

c.laser printers and toner cartridges

d.regular Pepsi and Diet Pepsi

7 If, for the last unit of a product produced, its value to society is less than the value society places on the resources required to produce it, then

Select one:

a.the marginal cost of production is too high.

b.the opportunity cost of continuing to produce that product is too low.

c.too much of the product is being produced.

d.too little of the product is being produced.

8 Perfectly competitive markets are economically efficient in the long run, partly because

Select one:

a.firms in these industries produce an output where the price is equal to the minimum average variable cost.

b.the price consumers are willing to pay for the last unit just equals the cost of having to produce that additional unit.

c.entry and exit guarantees a positive long-run profit above average total cost for each firm.

d.entry barriers enable such firms to invest in high-return capital projects.

9 The desire to have government intervene to correct market failure and establish economic efficiency overlooks the fact that

Select one:

a.government taxation will reduce a company's cost curves so much that it cannot profitably produce the product.

b.the market failure may be so severe that even government intervention cannot correct it.

c.market failure largely does not occur anymore in modern economies; thus, intervention is unnecessary.

d.lawmakers and regulators usually have incentives to seekothergoals besides economic efficiencyper se.

10 Economists refer to the inefficiency associated with a firm exercising market power as

Select one:

a.oligopoly.

b.antitrust.

c.producer surplus.

d.deadweight loss.

11 As a policy option for regulating natural monopoly, average (total) cost pricing is attractive because

Select one:

a.it ensures productive efficiency.

b.the losses that occur are a sign that consumers are not harmed by the firm's exercise of market power.

c.the regulated firm will always break even.

d.the resulting output exceeds that which would occur in a perfectly competitive industry.

12 A product that exhibits positive externalities will usually

Select one:

a.be produced in an amount greater than society would demand.

b.force additional costs onto third parties to a transaction.

c.provide only benefits in production; there are no costs involved in production.

d.be underproduced.

13 Yosemite National Park is not a pure public good because

Select one:

a.the scenic views are rivalrous in consumption.

b.it was not originally produced by the federal government.

c.the free rider problem is partially mitigated using entrance fees.

d.the general public is not allowed on the premises for much of the year.