Poll405 is currently the only firm offering an audience response system that professors can use during their online classes. The price charged by Poll405 is currently $130. A typical professor values Poll405's product at $200. A new firm, EVPoll is considering entering the market with a new product that is more user friendly and offers additional interactive features. Most teaching experts consider it to be worth $300 to professors. Suppose that a professor will incur a $50 switching cost if she switches to the new product. What is the maximum price EVPoll could charge to attract clients (assuming Poll405 maintains its price)?

$200

$130

$80

$180

$100

Gooble Pay is a pay-per-view movie provider that faces no competition (monopoly). Assume Gooble Pay has zero marginal cost. It faces the following demand function for the representative movie watcher:

P=55-2.5Q

What is the optimal fee Gooble Pay should charge the representative watcher for unlimited access?

$1,000

$1,210

$27.5

$605

$55

The market for good X was in a situation of monopoly, until the government broke the monopoly into many identical firms that now compete fiercely. What is likely to occur as a result of the break up (assuming the cost of producing the good did not change, and it's the same for each firm)?

All of the other answers

Consumer surplus will be greater

In the long run, firms producing good X will make zero economic profit

The quantity produced of good X will increase

Consumers will face a lower price for good X

The government imposes a per-unit tax on producers for each unit produced. Suppose the supply curve is upward sloping and the demand curve is downward sloping (as usual). The burden of the tax will always:

Fall on producers only as they are the ones paying the tax to the government

Be shared by consumers and producers depending on the elasticity of supply and demand

Be shared equally between producers and consumers

Fall mainly on producers as they are the ones paying the tax to the government

Fall on consumers only as the producers will raise the price

DaisyCo is an amusement park company using geographical segment pricing to increase profits. It charges different prices for its park entrance tickets in different countries. After investigating the demand in country A and in country B, DaisyCo decided to charge a higher price in country A. Which of the following statements is consistent with this decision?

DaisyCo has a lower market share in country A compared to its market share in country B

Consultants concluded that the price elasticity of demand for amusement parks is higher in country B than in country A

There are many similar amusement parks in country A, whereas there is only little competition in country B

The cost of providing amusement park services is higher in country B.

Consumers in country A have a lower purchasing power and are thus more price sensitive

Consider two firms that produce identical products in a situation of duopoly. The two firms have the same marginal cost. Which of the following statements isnottrue:

Under Cournot competition, the equilibrium price will be at the same level as the price under a monopoly

Under Bertrand competition, the equilibrium price will be at the same level as the equilibrium price under perfect competition

Under Cournot competition, the equilibrium price will be between the competitive and monopoly levels

Under Cournot competition, the equilibrium price is higher than the equilibrium price under Bertrand competition

The two firms will end up producing the same level of output

Conceptually, which statement applies both to a market under monopoly and to a market under monopolistic competition?

Firms are price takers in the long run

A firm operating in the market can make positive economic profits in the short run

If economic profits are being made in the short run, new firms will enter the market

A firm operating in the market always makes zero economic profit in the long run

None of the other answers

A shoe store sells 200 pairs of sneakers per month at a per-unit price of $120. This is the price and quantity at which profits are maximized. The owner needs to pay a monthly rent of $3,000 whether the store stays open or not. The total variable cost (TVC) of the shoe store is $29,000 per month. What should the owner of the store do in the short run?

Sell fewer pairs of shoes

Keep the store open even though negative profits are being made

Continue to produce as the store is making positive profits

Decrease the price and sell more shoes

Close the store

Which of the following situations reflects adverse selection?

When hiring a new employee, the firm is perfectly able to assess the productivity level of each candidate

Additional medical coverage tends to be priced too high for low-risk patients to enroll

Buyers and sellers of cars have full information on the quality of the cars

Someone applying for a loan will always be able to borrow at the rate corresponding to her risk level

All mutually beneficial transactions are taking place

FoisPas, a French restaurant in Westwood, has decided to increase the price of its Sunday brunch from $23 to $25. Following this price increase, the number of reservations on a typical Sunday dropped from 50 to 45. Which statement is correct?

The price increase leads to a decrease in total revenues as the demand is elastic at the current level

The price increase has a positive impact on profits as the demand is inelastic at the current level

The total costs faced of FoisPas will increase for sure

FoisPas is maximizing revenues as the demand is unit-elastic at the current level

The price increase leads to an increase in total revenues as the demand is elastic at the current level