Question
Q1: Which of the following is correct? a) For direct customization to be used consumers must have observable characteristics that are correlated with their price
Q1: Which of the following is correct?
a) For direct customization to be used consumers must have observable characteristics that are correlated with their price sensitivity.
b) When a monopolist offers a vertically differentiated product line (i.e. different quality levels), higher quality version is more expensive because it is costlier to produce a better quality product.
c) All of a monopolist's potential customers regardless of their WTP prefer uniform pricing to direct segmentation.
d) When the cost of development for a product is higher than anticipated, the seller should increase its prices to cover these costs.
Q2: A monopolist sells a product in two micro-markets. Monopolist's MC = 20. The demand curves are given by:
Micro-market #1: Q1 = 120 - P.
Micro-market #2: Q2 = 80 - 2P.
Suppose the monopolist must charge the same price in both markets. What is the optimal price?
a) 50
b) 40
c) 70
d) 60
Q3: A monopolist sells a product in two micro-markets. Monopolist's MC = 20. The demand curves are given by:
Micro-market #1: Q1 = 120 - P.
Micro-market #2: Q2 = 80 - 2P.
The monopolist is able to charge different prices in the two micro-markets. Compare the prices in the two micro-markets with the uniform price that it would charge if it had to charge the same price in both markets. The optimal prices are:
a) 70 micro-market #1 and 30 in micro-market #2.
b) 70 micro-market #1 and 20 in micro-market #2.
c) 60 micro-market #1 and 30 in micro-market #2.
d) 70 micro-market #1 and 60 in micro-market #2.
Q4: Suppose a monopolist has MC=0. The monopolist faces two demand curves. The demand curve in micro-market #1 is Q1 = 24-P anddemand curve in micro-market #2 is Q1 = 16-P. Then the monopolist's surplus with directsegmentationis:
a) 25% higher than its surplus with uniform price.
b) 4% higher than its surplus with uniform price.
c) 50% higher than its surplus with uniform price.
d) 20% higher than its surplus with uniform price.
Q5: It is sometimes said that a monopolist creates "dead-weight loss". By this it is meant that a monopolist
a) Need not be efficient and therefore tend to have excessively high cost levels.
b) Produce a quantity (below its capacity) where price is below average total cost.
c) Produce a quantity (below its capacity) where average total cost is not minimized.
d) Produce a quantity (below its capacity) where price is above marginal cost.
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