A small firm traps rabbits for their fur and feet. Each rabbit yields one pelt and two feet (only the hind feet are used to make good luck charms). The demand curve for pelts is given by P = 2.00 - 0.001Q and the demand for rabbit's feet is given by P =1.60 - 0.001Q

The marginal cost of trapping and processing each rabbit is $0.60. What is the profit maximizing prices of pelts and rabbit's feet?

Question 1Answer

$1.00 for pelts and $1.00 for rabbit's feet

$0.85 for pelts and $1.25 for rabbit's feet

None of the above are correct

$1.25 for pelts and $0.85 for rabbit's feet

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A small firm traps rabbits for their fur and feet. Each rabbit yields one pelt and two feet (only the hind feet are used to make good luck charms). The demand for pelts is given by P = 2.00 - 0.001Q

and the demand for rabbit's feet is given by P = 1.60- 0.001Q

The marginal cost of trapping and processing each rabbit is 0.60

What is the profit maximizing quantities of pelts and rabbit's feet?

Question 2Answer

None of the above

750

700

640

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Oligopoly behaviour can be described by a single model.

Question 3Select one:

True

False

For an oligopoly to exist in the long run,

Question 4Answer

Entry into the industry must be easy.

The product must be homogenous

The product must be differentiated

Entry into the industry must be difficult

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If an industry consists of eight firms with equal market shares, the HHI would be 1200.

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Game theory is a technique designed to evaluate situations where individuals and organizations

Question 6Answer

are making decisions under conditions of certainty

have conflicting objectives

None of the above is correct

cooperate to achieve common goals

An industry has 5 firms with 10 percent market shares and one firm with a 50 percent market share. The HHI for this industry is 3000.

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False

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In Game Theory, the cells of a payoff matrix show the

Question 8Answer

outcomes resulting from different combinations of strategies employed by the game participants

costs required to implement different strategies

None of the above

states of nature that may affect the outcome of employing different strategies

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Participants in the Prisoners Dilemma game are

Question 9Answer

allowed to cooperate

irrational

None of the above

risk neutral

An industry has four firms with ten percent market shares and 4 firms with fifteen percent market shares. What is the HHI for that industry?

Question 10Answer

1500

2400

1350

None of the above is correct

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Price discrimination occurs anytime that

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None of the above

price differences do not correspond to differences in cost

cost differences correspond to variation in costs

price differences correspond to variation in costs

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Commodity bundling is like price discrimination in that part of the consumer surplus is captured by the firm.

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False

First degree price discrimination involves

Question 13Answer

charging the minimum price for each unit sold

None of the above

charging different prices based on elasticities of demand

charging different prices based on quantity purchased

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Second degree price discrimination involves charging different prices based on the use to which the product is put by the consumer.

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In general with price discrimination, the profit maximizing price to the consumer increases as demand becomes more elastic.

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In general with price discrimination, the profit maximizing price to a customer increases as price becomes less elastic.

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A necessary condition for price discrimination is that the firm must have declining long run average costs.

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False

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If the costs of serving customers are equal, price discrimination would take the form of

Question 18Answer

Those customers which cost more to serve to pay more

Those customers which cost less to serve pay less

those with more elastic demand paying more

Those with more elastic demand paying less

An important advantage of cost plus pricing is simplicity of application.

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False

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A profit maximizing firm engaging in third degree price discrimination sells in two markets and the marginal cost is $2.00 in each market. If demand is given by P = 21 - 3Q in the first market, the price charged in this market should be $12.00.

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False