Question

MLTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question (2 points each). 1) Which of the following sellers is most able to perfectly price discriminate A) a clothing store C) a grocery supermarket B) the post office D) a college or university 2) When firms price discriminate they turn A) producer surplus; consumer surplus C) consumer surplus; profit into B) total cost; profit D) producer surplus; revenue 3) IE a firm faces a flat demand curve, A) it cannot engage in price discrimination. B) it can only engage in perfect price discrimination. C) it can only engage in two-part tariffs. D) None of the above. 4) The case where a firm sells each unit at the maximum amount each customer is willing to pay for it is called A) first-degree price discrimination. C) third-degree price discrimination B) second-degree price discrimination. D) nonlinear price discrimination. 5) Suppose a monopolist has TC-40+100+02, and the demand curve it faces is p-130-2Q. What is the profit-maximizing price and output? A) P-110:Q-40 B) P-90:Q-20 C) P-50:Q-20 D) P-90:Q-40 6) Suppose a monopolist has TC-40+ 10Q+02 and the demand curve it faces is p- 130-2Q. What is the monopolist's total cost (TC) at the profit-maximizing level of output? A) TC-840 B) TC 640 C) TC-720 D) TC- 320 7) Suppose a monopolist has TC-40+100+02, and the demand curve it faces is p-130-2Q. What is the maximum profit achieved by this monopoly? A) Profit-1800 C) Profit -1240 B) Profit- 1160 D) Profit- 1450 8) The ability of a monopoly to charge a price that exceeds marginal cost depends on A) slope of the demand curve. C) the price elasticity of supply B) price elasticity of demand. D) shape of the marginal cost curve. 9) The above figure shows the demand and marginal cost curves for a monopoly.

Answer 1

1) D
(A college can get to know the reservation price most clearly and students have different elasticity of demand so it can price discriminate most perfectly.)

2) C
(Consumer surplus is turned into profit of producers with price discrimination.)

3) A
(Price discrimination can not take place when demand curve is flat.)

4) A
(It means each consumer is charged his/her reservation price which is first degree price discrimination.)

(Note: Post 4 MCQs at a time.)