Question 1

For the three-tiered pricing structure that maximizes the firm's producer surplus, total cost can be calculated as:
A)  .
B)  .
C)  .
D)  .

Accepted Answer

The answer of For the three-tiered pricing structure that maximizes...

Question 2

A firm with market power faces the demand function q = 150 - 10P. The firm's marginal cost function is MC(q) = 2 + 0.1q. If the firm establishes a block-pricing structure with two prices, what two prices will the firm use to maximize producer surplus?

Accepted Answer

The answer of A firm with market power faces the...

Question 3

For the case of a perfect price-discriminating monopolist (ppdm), total surplus can be calculated as:
A)  .
B)  .
C) Both A and B.
D) Neither A nor B.

Accepted Answer

The answer of For the case of a perfect price-discriminating...

Question 4

To ensure maximization and not minimization in the case of the perfectly -price-discriminating monopolist, check that:
A) 
B)  .
C)  .
D)  .

Accepted Answer

The answer of To ensure maximization and not minimization in...

Question 5

A firm with market power faces the demand function q = 1,000 - P. The firm's total cost function is TC(q) = 5q + q² + 500. Use calculus for the following: a. If the firm behaves as a single-price monopoly, what are the firm's optimal price and output level? b. Demonstrate that the single-price monopolist's profit-maximizing choice of price and output also maximize producer surplus. c. Identify the output level that would maximize total surplus. d. Identify the output level that a perfect-price discriminating monopolist would produce.

Accepted Answer

The answer of A firm with market power faces the...

Question 6

A single-price monopolist's objective is to choose q such that:
A)  .
B)  .
C)  .
D)  .

Accepted Answer

A single-price monopolist's objective is to maximize profit, which is equal to total revenue minus total cost. The formula for total revenue is price times quantity (TR = P x Q). Therefore, the monopolist's objective is to choose the quantity that maximizes (P x Q) - TC, where TC is total cost. Option A represents this objective, while the other options do not mention both revenue and cost.

Question 7

For the case of a perfectly price-discriminating monopolist (ppdm), consumer surplus can be calculated as:
A)  .
B)  .
C)  .
D)  .

Accepted Answer

The answer of For the case of a perfectly price-discriminating...

Question 8

A firm with market power faces the demand function q = 2,000 - 20P. The firm's total cost function is TC(q) = 20q + 0.02q² + 2,000. a. If the firm behaves as a single-price monopoly, what are its optimal price and output level? b. Demonstrate that the single-price monopolist's profit-maximizing choice of price and output also maximize producer surplus. c. Identify the output level that would maximize total surplus. d. Identify the output level that a perfectly price-discriminating monopolist would produce.

Accepted Answer

The answer of A firm with market power faces the...

Question 9

If the firm establishes a block-pricing structure with two prices, the relevant system of first-order conditions is:
A)  and  .
B)  and  .
C)  and  .
D)  and  .

Accepted Answer

The answer of If the firm establishes a block-pricing structure...

Question 10

A utility company faces demand given by q = 40 - 0.1p, where p is the price per unit.
a. If the company charges only one price, what price per unit will maximize revenue?
b. If the company adopts a two-tier pricing structure, what price per unit will maximize revenue?

Accepted Answer

The answer of A utility company faces demand given by...

Question 11

For the case of a perfectly price-discriminating monopolist (ppdm), producer surplus can be calculated as:
A)  .
B)  .
C)  .
D)  .

Accepted Answer

The answer of For the case of a perfectly price-discriminating...

Question 12

A firm with market power faces the demand function q = 250 - 5P. The firm's marginal cost function is MC(q) = 5 + 0.2q. If the firm establishes a block-pricing structure with two prices, what prices will the firm use to maximize producer surplus?

Accepted Answer

The answer of A firm with market power faces the...

Question 13

A firm with market power faces the demand function q = 1,000 - 100P. The firm's marginal cost function is MC(q) = 2 + 0.08q.
a. If the firm behaves as a single-price monopoly, what are its optimal price and output?
b. If the firm behaves as a single-price monopoly, what are consumer surplus, producer surplus, and total surplus?
c. If the firm establishes a block-pricing structure with two prices, what prices will the firm use to maximize producer surplus?
d. If the firm establishes a block-pricing structure with two prices and maximizes producer surplus, what are consumer surplus, producer surplus and total surplus?

Accepted Answer

The answer of A firm with market power faces the...

Question 14

For a perfectly price-discriminating monopolist (ppdm), profit can be calculated as:
A)  where  .
B)  where  and 
C)  where  and 
D)  where  .

Accepted Answer

For a ppdm, the profit-maximizing output is the point on the demand curve where marginal revenue (MR) equals marginal cost (MC). Since a ppdm charges each customer the maximum amount they are willing to pay, the demand curve in this case is also the marginal revenue curve. The profit can be calculated as (P-AC)xQ, where P is the price, AC is the average cost, and Q is the quantity sold.

In choice B, the MR curve is given by 11eb11da_1d21_81f0_ad38_b373400b75ab_TB3883_11 and the MC curve is given by 11eb11da_1d21_81f1_ad38_1d5a15bd7136_TB3883_11. The profit-maximizing output is where MR=MC, which is Q=2. At Q=2, the price is given by the demand curve 11eb11da_1d21_81f2_ad38_fd36cf626c1a_TB3883_11. Plugging in Q=2 and the corresponding price into the profit equation, we get a profit of 11eb11da_1d21_5adf_ad38_0f0651a6d8d8_TB3883_11.

Therefore, the correct choice is B.

Question 15

For the two-tiered block-pricing structure that maximizes the firm's producer surplus, total cost can be calculated as:
A) 
B) 
C) 
D)

Accepted Answer

The answer of For the two-tiered block-pricing structure that maximizes...

Question 16

Suppose a firm that can perfectly price discriminate faces the demand function P = 100 - q². The firm's total production costs are given by MC(q) = q + q². If the firm can perfectly price-discriminate, what is its output level?

Accepted Answer

The answer of Suppose a firm that can perfectly price...

Question 17

Suppose a firm faces the demand function q = 600 - 6P. The firm's total production costs are given by MC(q) = 5q / 6 + q². Further suppose that the firm can perfectly price-discriminate. What is its output level?

Accepted Answer

The answer of Suppose a firm faces the demand function...

Question 18

Suppose a firm that can perfectly price-discriminate faces the demand function P = 400 - 2q. The firm's total production costs are given by MC(q) = 2q + 2q². If the firm can perfectly price-discriminate, what is its output level?

Accepted Answer

The answer of Suppose a firm that can perfectly price-discriminate...

Question 19

If the firm establishes a block-pricing structure with three prices, the relevant system of first-order conditions is:
A)  .
B)  .
C)  .
D)  .

Accepted Answer

The answer of If the firm establishes a block-pricing structure...

Question 20

Suppose a firm faces the demand function q = 800 - 4P. The firm's total production costs are given by MC(q) = 9.5q + q². a. If the firm cannot price-discriminate, what are its profit-maximizing output and price? b. If the firm maximizes profits but cannot price-discriminate, what are its consumer surplus and producer surplus? Calculate the deadweight loss from market power. c. If the firm can perfectly price-discriminate, what is its output level? d. If the firm can perfectly price-discriminate, what are its consumer surplus and producer surplus? What is the deadweight loss from market power?

Accepted Answer

The answer of Suppose a firm faces the demand function...

Quiz 10: Market Power and Pricing Strategies

For the three-tiered pricing structure that maximizes the firm's producer surplus, total cost can be calculated as:

A firm with market power faces the demand function q = 150 - 10P. The firm's marginal cost function is MC(q) = 2 + 0.1q. If the firm establishes a block-pricing structure with two prices, what two prices will the firm use to maximize producer surplus?

For the case of a perfect price-discriminating monopolist (ppdm) , total surplus can be calculated as:

To ensure maximization and not minimization in the case of the perfectly -price-discriminating monopolist, check that:

A single-price monopolist's objective is to choose q such that:

For the case of a perfectly price-discriminating monopolist (ppdm) , consumer surplus can be calculated as:

If the firm establishes a block-pricing structure with two prices, the relevant system of first-order conditions is:

A utility company faces demand given by q = 40 - 0.1p, where p is the price per unit. a. If the company charges only one price, what price per unit will maximize revenue? b. If the company adopts a two-tier pricing structure, what price per unit will maximize revenue?

For the case of a perfectly price-discriminating monopolist (ppdm) , producer surplus can be calculated as:

A firm with market power faces the demand function q = 250 - 5P. The firm's marginal cost function is MC(q) = 5 + 0.2q. If the firm establishes a block-pricing structure with two prices, what prices will the firm use to maximize producer surplus?

For a perfectly price-discriminating monopolist (ppdm) , profit can be calculated as:

For the two-tiered block-pricing structure that maximizes the firm's producer surplus, total cost can be calculated as:

Suppose a firm that can perfectly price discriminate faces the demand function P = 100 - q². The firm's total production costs are given by MC(q) = q + q². If the firm can perfectly price-discriminate, what is its output level?

Suppose a firm faces the demand function q = 600 - 6P. The firm's total production costs are given by MC(q) = 5q / 6 + q². Further suppose that the firm can perfectly price-discriminate. What is its output level?

Suppose a firm that can perfectly price-discriminate faces the demand function P = 400 - 2q. The firm's total production costs are given by MC(q) = 2q + 2q². If the firm can perfectly price-discriminate, what is its output level?

If the firm establishes a block-pricing structure with three prices, the relevant system of first-order conditions is:

Quiz 10: Market Power and Pricing Strategies

For the three-tiered pricing structure that maximizes the firm's producer surplus, total cost can be calculated as:

A firm with market power faces the demand function q = 150 - 10P. The firm's marginal cost function is MC(q) = 2 + 0.1q. If the firm establishes a block-pricing structure with two prices, what two prices will the firm use to maximize producer surplus?

For the case of a perfect price-discriminating monopolist (ppdm) , total surplus can be calculated as:

To ensure maximization and not minimization in the case of the perfectly -price-discriminating monopolist, check that:

A single-price monopolist's objective is to choose q such that:

For the case of a perfectly price-discriminating monopolist (ppdm) , consumer surplus can be calculated as:

If the firm establishes a block-pricing structure with two prices, the relevant system of first-order conditions is:

A utility company faces demand given by q = 40 - 0.1p, where p is the price per unit. a. If the company charges only one price, what price per unit will maximize revenue? b. If the company adopts a two-tier pricing structure, what price per unit will maximize revenue?

For the case of a perfectly price-discriminating monopolist (ppdm) , producer surplus can be calculated as:

A firm with market power faces the demand function q = 250 - 5P. The firm's marginal cost function is MC(q) = 5 + 0.2q. If the firm establishes a block-pricing structure with two prices, what prices will the firm use to maximize producer surplus?

For a perfectly price-discriminating monopolist (ppdm) , profit can be calculated as:

For the two-tiered block-pricing structure that maximizes the firm's producer surplus, total cost can be calculated as:

Suppose a firm that can perfectly price discriminate faces the demand function P = 100 - q2. The firm's total production costs are given by MC(q) = q + q2. If the firm can perfectly price-discriminate, what is its output level?

Suppose a firm faces the demand function q = 600 - 6P. The firm's total production costs are given by MC(q) = 5q / 6 + q2. Further suppose that the firm can perfectly price-discriminate. What is its output level?

Suppose a firm that can perfectly price-discriminate faces the demand function P = 400 - 2q. The firm's total production costs are given by MC(q) = 2q + 2q2. If the firm can perfectly price-discriminate, what is its output level?

If the firm establishes a block-pricing structure with three prices, the relevant system of first-order conditions is:

Suppose a firm that can perfectly price discriminate faces the demand function P = 100 - q². The firm's total production costs are given by MC(q) = q + q². If the firm can perfectly price-discriminate, what is its output level?

Suppose a firm faces the demand function q = 600 - 6P. The firm's total production costs are given by MC(q) = 5q / 6 + q². Further suppose that the firm can perfectly price-discriminate. What is its output level?

Suppose a firm that can perfectly price-discriminate faces the demand function P = 400 - 2q. The firm's total production costs are given by MC(q) = 2q + 2q². If the firm can perfectly price-discriminate, what is its output level?