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Virtual University MC)s BA08 / MC)s Collection !rom (nline )ui**es .C(%45 Microeconomics Important Solved MC)s !or !inal erm .6am Pu9lis"ed on Monday: 5; <anuary 54=5 =>:;> ?ritten 9y Bon!ire .C(%45 Microeconomics Important Solved MC)s !or !inal erm .6am s"ared 9y Syeda S"ee*a s"i*aaroo1@#mailAcom =A ?"ic" o! t"e !olloBin# strate#ies are used 9y 9usiness !irms to capture consumersurplus7 =A 5A ;A %A price discriminationA 9undlin#A tBo/part tari!!sA dA all o! t"e a9oveA

5A Rat"er t"an c"ar#in# a sin#le price to all customers: a !irm c"ar#es a "i#"er price to men and a loBer price to BomenA By en#a#in# in t"is practice: t"e !irm: =A 5A ;A %A CA is tryin# to reduce its costs and t"ere!ore increase its pro!itA is en#a#in# in an ille#al activity t"at is pro"i9ited 9y t"e S"erman Antitrust ActA is attemptin# to convert producer surplus into consumer surplusA dA is attemptin# to convert consumer surplus into producer surplusA

9ot" $a' and $c' are correctA

;A An electric poBer company uses 9lock pricin# !or electricity salesA Block pricin# is an e6ample o! =A 5A ;A !irst/de#ree price discriminationA second/de#ree price discriminationA t"ird/de#ree price discriminationA

%A

Block pricin# is not a type o! price discriminationA

%A ?"en a !irm c"ar#es eac" customer t"e ma6imum price t"at t"e customer is Billin# to pay: t"e !irm =A 5A ;A %A en#a#es in a discrete pricin# strate#yA c"ar#es t"e avera#e reservation priceA en#a#es in second/de#ree price discriminationA dA en#a#es in !irst/de#ree price discriminationA

CA "e ma6imum price t"at a consumer is Billin# to pay !or eac" unit 9ou#"t is t"e DDDDDDDDDDDDDD priceA =A 5A ;A %A CA market 9A reservation

consumer surplus auction c"oke

>A Second/de#ree price discrimination is t"e practice o! c"ar#in# =A 5A ;A %A t"e reservation price to eac" customerA 9A di!!erent prices !or di!!erent 9locks o! t"e same #ood or serviceA

di!!erent #roups o! customers di!!erent prices !or t"e same productsA eac" customer t"e ma6imum price t"at "e or s"e is Billin# to payA

EA A !irm is c"ar#in# a di!!erent price !or eac" unit purc"ased 9y a consumerA "is is called =A 5A ;A %A CA aA !irst/de#ree price discriminationA

second/de#ree price discriminationA t"ird/de#ree price discriminationA !ourt"/de#ree price discriminationA !i!t"/de#ree price discriminationA

=44F C(RR.C A0S?.RSAAAAA

GA A tennis pro c"ar#es H=C per "our !or tennis lessons !or c"ildren and H;4 per "our !or tennis lessons !or adultsA "e tennis pro is practicin# =A 5A ;A %A CA !irst/de#ree price discriminationA second/de#ree price discriminationA cA t"ird/de#ree price discriminationA

!ourt"/de#ree price discriminationA !i!t"/de#ree price discriminationA

IA -iscrimination 9ased upon t"e Juantity consumed is re!erred to as DDDDDDDDDDDDDD price discriminationA =A 5A ;A %A !irst/de#ree 9A second de#ree

t"ird/de#ree #roup

=4A A doctor si*es up patientsK income and c"ar#es Bealt"y patients more t"an poorer onesA "is pricin# sc"eme represents a !orm o! =A 5A ;A %A !irst/de#ree price discriminationA second/de#ree price discriminationA cA t"ird/de#ree price discriminationA

pricin# at eac" consumerLs reservation priceA

==A =A 5A ;A

"ird/de#ree price discrimination involves

c"ar#in# eac" consumer t"e same tBo part tari!!A c"ar#in# loBer prices t"e #reater t"e Juantity purc"asedA t"e use o! increasin# 9lock rate pricin#A

%A dA c"ar#in# di!!erent prices to di!!erent #roups 9ased upon di!!erences in elasticity o! demandA

=5A =A 5A ;A %A CA aA

"e ma6imum price t"at a consumer is Billin# to pay !or a #ood is called:

t"e reservation priceA

t"e market priceA t"e !irst/de#ree priceA t"e 9lock priceA t"e c"oke priceA

=;A Mc-onaldKs restaurant located near t"e "i#" sc"ool o!!ered a uesday special !or "i#" sc"ool studentsA I! "i#" sc"ool students s"oBed t"eir student I- cards: t"ey Bould 9e #iven C4 cents o!! any special mealA "is practice is an e6ample o!: =A collusionA

5A ;A %A CA

9A

price discriminationA

tBo/part tari!!A 9undlin#A tyin#A

=%A In =II%: t"e ?alt -isney Corporation ran a special promotion on tickets to -isneylandA Residents o! sout"ern Cali!ornia Bere o!!ered admission at t"e special price o! H55A (t"er visitors to -isneyland Bere c"ar#ed a9out H;4A "is practice is an e6ample o!: =A 5A ;A %A CA collusionA 9A price discriminationA

tBo/part tari!!A 9undlin#A tyin#A

=CA Some #rocery stores are noB o!!erin# customers coupons B"ic" entitle t"em to a discount on certain items on t"eir ne6t visit B"en t"ey #o t"rou#" t"e c"eck/out lineA "is practice is an e6ample o!: =A 5A ;A %A CA intertemporal price discriminationA 9A t"ird de#ree price discriminationA

a tBo/part tari!!A 9undlin#A none o! t"e a9oveA

=>A ?"ic" o! t"e !olloBin# is 0( a condition !or t"ird de#ree price discrimination7

=A 5A ;A %A

Monopoly poBerA -i!!erent oBn price elasticities o! demandA cA .conomies o! scaleA

Separate marketsA

=EA A t"ird/de#ree price discriminatin# monopolist can sell its output eit"er in t"e local market or on an internet auction site $or 9ot"'A Havin# sold all o! its output it discovers t"at t"e mar#inal revenue in t"e local market is H54 B"ile its mar#inal revenue on t"e internet auction site is H;4A o ma6imi*e pro!its t"e !irm s"ould =A 5A ;A %A CA "ave sold more output in t"e local market and less at t"e internet auction siteA do not"in# until it acJuires more in!ormation on costsA "ave sold less output in t"e local market and more on t"e internet auction siteA sell less in 9ot" markets until mar#inal revenue is *eroA sell more in 9ot" markets until mar#inal cost is *eroA

=GA Suppose t"at t"e mar#inal cost o! an additional ton o! steel produced 9y t"e <apanese is t"e same B"et"er t"e steel is set aside !or domestic use or e6ported a9roadA I! t"e price elasticity o! demand !or steel is #reater a9road t"an it is in <apan: B"ic" o! t"e !olloBin# Bill 9e correct7 =A 5A "e <apanese Bill sell more steel a9road t"an t"ey Bill sell in <apanA "e <apanese Bill sell more steel in <apan t"an t"ey Bill sell a9roadA

;A cA "e <apanese Bill sell steel at a loBer price a9road t"an t"ey Bill c"ar#e domestic usersA %A "e <apanese Bill sell steel at a "i#"er price a9road t"an t"ey Bill c"ar#e domestic usersA CA Insu!!icient in!ormation e6ists to determine B"et"er t"e price or Juantity Bill 9e "i#"er or loBer a9roadA

=IA &ou are t"e producer o! stereo componentsA "ere are tBo markets: !orei#n and domesticA "e tBo #roups o! consumers cannot trade Bit" one anot"erA I! your !irm practices t"ird/de#ree price discrimination: B"en you "ave ma6imi*ed pro!its: t"e mar#inal revenue =A 5A ;A %A CA in t"e !orei#n market Bill eJual t"e mar#inal costA in t"e domestic market Bill eJual t"e mar#inal costA in t"e domestic market Bill eJual t"e mar#inal revenue in t"e domestic marketA dA all o! t"e a9oveA

none o! t"e a9ove

54A &ou are t"e producer o! stereo componentsA "ere are tBo markets: !orei#n and domesticA "e tBo #roups o! consumers cannot trade Bit" one anot"erA &ou Bill c"ar#e t"e "i#"er price in t"e market Bit" t"e =A 5A ;A %A aA loBer oBn price elasticity o! demand $more inelastic demand'A

"i#"er oBn price elasticity o! demand $more elastic demand'A lar#er teena#e populationA #reater consumer incomesA

5=A 3or a per!ect !irst/de#ree price discriminator: incremental revenue is =A #reater t"an price i! t"e demand curve is doBnBard slopin#A

5A t"e same as t"e mar#inal revenue curve i! t"e !irm is a non/discriminatin# monopolistA ;A %A cA eJual to t"e price paid !or eac" unit o! outputA

less t"an t"e mar#inal revenue !or a non/discriminatin# monopolistA

55A In t"ird/de#ree price discrimination a !irm !aces tBo marketsA In t"e !irst market t"e !irm c"ar#es H;4 per unit: and in t"e second market it c"ar#es H55 per unitA ?"ic" o! t"e !olloBin# represents t"e ratio o! elasticities o! demand in t"e tBo markets7 =A 5A ;A %A CA .5 M $5=N5I'.=A .5 M $5IN5='.= .5 M .=A .5 M $55N;4'.=A eA none o! t"eseA

5;A A !irm sells an identical product to tBo #roups o! consumers: A and BA "e !irm "as decided t"at t"ird/de#ree price discrimination is !easi9le and Bis"es to set prices t"at ma6imi*e pro!itsA ?"ic" o! t"e !olloBin# 9est descri9es t"e price and output strate#y t"at Bill ma6imi*e pro!its7 =A 5A ;A %A PA M PB M MCA MRA M MRBA cA MRA M MRB M MCA

$MRA / MRB' M $= / MC'A

5%A Bindy: an =G year old "i#" sc"ool #raduate: and 2uciana: a %4 year old colle#e #raduate: 1ust purc"ased identical "ot neB sports carsA Acme Insurance c"ar#es a "i#"er rate to insure Bindy t"an 2ucianaA "is practice is an e6ample o!: =A 5A ;A %A CA collusionA price discriminationA tBo/part tari!!A 9undlin#A eA none o! t"e a9oveA

5CA Under per!ect price discrimination: mar#inal pro!it at eac" level o! output eJual =A 5A ;A %A 4 P/ACA cA P/ARA P/MCA

5>A Under per!ect price discrimination: consumer surplus =A 5A ;A %A is less t"an *eroA is #reater t"an *eroA cA eJuals *eroA

is ma6imi*edA

5EA ?"en a monopolist en#a#es in per!ect price discrimination: =A 5A ;A %A t"e mar#inal revenue curve lies 9eloB t"e demand curveA 9A t"e demand curve and t"e mar#inal revenue curve are identicalA

mar#inal cost 9ecomes *eroA t"e mar#inal revenue curve 9ecomes "ori*ontalA

5GA "e mana#er o! a !irm is attemptin# to practice t"ird de#ree price discriminationA S"e "as eJuated t"e mar#inal revenue in eac" o! "er marketsA By doin# t"is "er =A 5A pro!its are ma6imi*edA costs are minimi*ed #iven "er level o! outputA

;A %A

cA

revenues are ma6imi*ed #iven "er level o! outputA

all o! t"e a9oveA

5IA ?"en a company introduces neB audio products: it o!ten initially sets t"e price "i#" and a9out a year later it loBers t"e priceA "is is an e6ample o! =A 5A ;A %A a tBo/part tari!!A second/de#ree price discriminationA cA intertemporal price discriminationA

!irst/de#ree price discriminationA

;4A Clu9 Med: B"ic" runs a num9er o! vacation resorts: o!!ers vacation packa#es at a loBer price in t"e Binter: t"e Oo!! season:O t"an in t"e summerA "is practice is an e6ample o!: =A 5A ;A %A CA peak/load pricin#A intertemporal price discriminationA tBo/part tari!!A 9undlin#A eA 9ot" $a' and $9' are correctA

;=A In peak load pricin#: =A 5A ;A %A mar#inal revenue is eJual in 9ot" periodsA 9A mar#inal revenue in t"e peak period is #reater t"an in t"e o!!/peak periodA

mar#inal revenue in t"e peak period is less t"an in t"e o!!/peak periodA t"e sum o! t"e mar#inal revenues is #reater t"an t"e sum o! t"e mar#inal costsA

;5A ?"en t"e movie O<urassic ParkO de9uted in ?estBood: Cali!ornia: t"e price o! tickets Bas HEAC4A A!ter several mont"s t"e ticket price "ad !allen to H%A44A "is is an e6ample o! =A 5A ;A %A CA peak/load pricin#A second/de#ree price discriminationA a tBo/part tari!!A tyin#A eA none o! t"e a9oveA

;;A "e price o! on/campus parkin# !rom G:44 AM to C:44 PM: Monday t"rou#" 3riday: is H;A44A 3rom C:44 PM to =4:44 PM: Monday t"rou#" 3riday: t"e price is H=A44A At all ot"er times parkin# is !reeA "is is an e6ample o! =A 5A ;A %A CA 9undlin#A second/de#ree price discriminationA a tBo/part tari!!A tyin#A eA none o! t"e a9oveA

;%A A local restaurant o!!ers Oearly 9irdO price discounts !or dinners ordered !rom %:;4 to >:;4 PMA "is is an e6ample o! =A 5A ;A %A aA peak/load pricin#A

second/de#ree price discriminationA a tBo/part tari!!A tyin#A

CA

none o! t"e a9oveA

;CA A local t"eater prices every ticket in t"e t"eater at HCA44 !or matineesA -urin# t"e evenin#: ticket prices are muc" "i#"erA "is is an e6ample o! =A 5A ;A %A CA aA peak/load pricin#A

second/de#ree price discriminationA a tBo/part tari!!A 9undlin#A none o! t"e a9oveA

per rideA =A 5A ;A %A CA

;>A An amusement park c"ar#es an entrance !ee o! HEC per person: t"en H5AC4 "is is an e6ample o!

!irst/de#ree price discriminationA 9A a tBo/part tari!!A

second/de#ree price discriminationA 9undlin#A tyin#A

;EA ?"en people pay a mont"ly !ee to "ave a "ookup to t"e telep"one companyKs line plus a !ee !or eac" call actually made: Be Bould say t"at t"e telep"one company is usin# =A 5A ;A limit pricin#A 9A a tBo/part tari!!A

second/de#ree price discriminationA

%A

tBo sta#e price discriminationA

;GA A pricin# strate#y t"at reJuires consumers pay an up/!ront !ee plus an additional !ee !or eac" unit o! product purc"ased is a =A 5A ;A %A tyin# contractA 9A tBo/part tari!!A

!orm o! per!ect price discriminationA none o! t"eseA

;IA A national c"ain o! 9ookstores "as initiated a !reJuent 9uyer pro#ramA I! you 9uy a !reJuent 9uyer card !or H=4: you are entitled to a =4 percent discount on all purc"ases !or = yearA "is practice is an e6ample o!: =A 5A ;A %A CA peak/load pricin#A intertemporal price discriminationA cA tBo/part tari!!A

9undlin#A 9ot" $a' and $9' are correctA

%4A A !irm settin# a tBo/part tari!! Bit" only one customer s"ould set t"e entry !ee eJual to =A 5A ;A %A mar#inal costA 9A consumer surplusA

mar#inal revenueA priceA

%=A "e local ca9le V company c"ar#es a O"ook/upO !ee o! H;4 per mont"A Customer can t"en Batc" pro#rams on a Opay/per/vieBO 9asis $a !ee is c"ar#ed !or every pro#ram Batc"ed'A "is is an e6ample o! =A 5A ;A %A CA peak/load pricin#A second/de#ree price discriminationA cA a tBo/part tari!!A

intertemporal price discriminationA none o! t"e a9oveA

%5A

"e pricin# tec"niJue knoBn as tyin#

=A 5A ;A %A

permits a !irm to meter demandA permits a !irm to practice price discriminationA ena9les a !irm to e6tend its monopoly poBer to neB marketsA dA all o! t"e a9oveA

%;A Season ticket "olders !or t"e StA 2ouis Rams received a surprise B"en t"ey received t"eir applications to reneB t"eir season ticketsA In order to #et your season ticket to t"e RamsK "ome #ames: you "ad to 9uy tickets to t"e preseason #amesA Many season ticket "olders #rum9led a9out t"is practice as an under"anded Bay !or t"e StA 2ouis Rams to #et more money !rom its season ticket "oldersA "is practice is an e6ample o!: =A 5A ;A %A CA peak/load pricin#A intertemporal price discriminationA tBo/part tari!!A dA 9undlin#A

9ot" $a' and $9' are correctA

%%A A local restaurant sells straB9erry pie !or H;A44 per sliceA HoBever: i! you order t"e prime ri9 dinner: you can #et a slice o! pie !or only a dollarA "is is an e6ample o! =A 5A ;A %A CA aA 9undlin#A

second/de#ree price discriminationA a tBo/part tari!!A tyin#A none o! t"e a9oveA

%CA A local restaurant o!!ers an Oall/you/can/eatO salad 9ar !or H;A%IA HoBever: Bit" any sandBic": a customer can add t"e Oall/you/can/eatO salad 9ar !or H=A%IA "is is an e6ample o! =A 5A ;A %A CA peak/load pricin#A second/de#ree price discriminationA a tBo/part tari!!A tyin#A eA none o! t"e a9oveA

%>A Bundlin# products makes sense !or t"e seller B"en =A 5A ;A %A consumers "ave "etero#eneous demandsA t"e products are complementary in natureA !irms cannot price discriminateA dA 9ot" $a' and $c'A

%EA Bundlin# is e!!ective B"en demands are DDDDDDDDDDDD and DDDDDDDDDDDD correlatedA =A 5A ;A %A CA aA di!!erentP ne#atively

di!!erentP positively similarP ne#atively similarP positively identicalP per!ectly

%GA Bundlin# raises "i#"er revenues t"an sellin# t"e #oods separately B"en =A 5A ;A %A CA demands !or tBo #oods are "i#"ly positively correlatedA demands !or tBo products are mildly positively correlatedA cA demands !or tBo products are ne#atively correlatedA

t"ere is a per!ect positive correlation 9etBeen t"e demands !or tBo #oodsA t"e #oods are complementary in natureA

%IA Mi6ed 9undlin# is more pro!ita9le t"an pure 9undlin# B"en =A t"e mar#inal cost o! eac" #ood 9ein# sold is positiveA

5A t"e consumersL reservation values o! eac" #ood 9ein# sold are not per!ectly ne#atively correlated Bit" one or anot"erA ;A %A cA 9ot" $a' and $9' applyA

t"e mar#inal cost o! one #ood is *eroA

C4A (ne ,uyKs Pi**a advertisin# e6penditures are H=:544 and sales are H;4:444A ?"en advertisin# increases to H=:%44: sales increase to H;5:444A "e arc advertisin# elasticity o! demand is appro6imately =A 5A ;A %A CA 4 4A= cA 5AC =5AC 4A%

C=A A =4 percent decrease in advertisin# results in a C percent sales decreaseA "e advertisin# elasticity o! demand is =A 5A ;A %A CA /5A4 /4AC cA 5 none o! t"e a9oveA 4AC

C5A Use t"e !olloBin# statements to ansBer t"is JuestionA IA o ma6imi*e pro!it: a !irm Bill increase its advertisin# e6penditures until t"e last dollar o! advertisin# 1ust 9rin#s !ort" an additional dollar o! revenueA IIA "e !ull mar#inal cost o! advertisin# is t"e sum o! t"e dollar spent directly on advertisin# and t"e mar#inal production cost t"at results !orm t"e increased sales t"at advertisin# 9rin#s a9outA

=A 5A

Bot" I and II are trueA I is true: and II is !alseA

;A %A Q

cA

I is !alse: and II is trueA

Bot" I and II are !alseA

C;A Use t"e !olloBin# statements to ansBer t"is JuestionA IA o ma6imi*e pro!it: a !irm Bill advertise more B"en t"e advertisin# elasticity is lar#erA IIA o ma6imi*e pro!it: a !irm Bill advertise more B"en t"e price elasticity o! demand is smallerA =A 5A ;A %A aA Bot" I and II are trueA

I is true: and II is !alseA I is !alse: and II is trueA Bot" I and II are !alseA

C%A "e price elasticity o! demand !or nursery products is /=4A "e advertisin# elasticity o! demand is 4A%A Usin# t"e ORule o! "um9 !or Advertisin#:O t"e level o! advertisin# Bill 9e set at DDDDD o! salesA =A 5A ;A %A 4A5C percent 4A% percent cA % percent

%4 percent

CCA ,rocery store c"ains advertise more t"an convenience stores 9ecause: =A t"e advertisin# elasticity o! demand is smaller !or #rocery store c"ains t"an !or convenience storesA 5A convenience stores "ave more elastic demand !or t"eir products t"en #rocery store c"ainsA

;A cA t"e advertisin# elasticity o! demand !or convenience stores is near *ero and is muc" smaller t"an !or #rocery store c"ainsA %A CA all o! t"e a9oveA none o! t"e a9oveA

C>A "e Acme (il Company is a vertically inte#rated !irmA It e6plores !or and e6tracts crude oilA It also re!ines t"e crude oil into #asoline and ot"er products: and sells t"ese products to consumersA "e internal price t"at Acme (il uses B"en t"e crude oil t"at it e6tracts is OsoldO to one o! its re!ineries is called: =A 5A ;A %A CA t"e s"adoB priceA 9A t"e trans!er priceA

t"e market priceA t"e non/market priceA none o! t"e a9oveA

CEA "e Acme (il Company is a vertically inte#rated !irmA It e6plores !or and e6tracts crude oilA It also re!ines t"e crude oil into #asoline and ot"er products: and sells t"ese products to consumersA "ere are many ot"er !irms t"at e6tract and sell crude oil so t"at t"e market !or crude oil is re#arded 9y Acme (il as competitiveA "e internal price t"at Acme (il uses B"en t"e crude oil t"at it e6tracts is OsoldO to one o! its re!ineries: =A aA eJuals t"e market price !or crude oilA

5A eJuals t"e market price !or crude oil less a discount 9ecause Acme (il does not to pro!it !rom itsel!A ;A %A is unrelated to t"e market price o! crude oilA is #reater t"an t"e mar#inal cost o! e6tractin# crude oilA

CGA ?"at is net mar#inal revenue7 =A "e same as mar#inal pro!itA

5A 9A "e additional revenue t"e !irm earns !rom an e6tra unit o! an internally produced intermediate inputA ;A %A "e additional revenue t"e !irm earns !rom producin# one more unit o! outputA "e additional revenue t"e !irm earns !rom sellin# one more unit o! outputA

CIA ?"at is t"e pro!it ma6imi*in# condition !or a vertically inte#rated !irm7 =A 0et mar#inal revenue eJuals t"e sum o! t"e mar#inal costs o! t"e intermediate inputsA 5A ;A %A Mar#inal revenue eJuals t"e mar#inal cost o! t"e !inal outputA cA 0et mar#inal revenue eJuals t"e mar#inal cost o! eac" intermediate #oodA

"e sum o! net mar#inal revenues eJuals t"e mar#inal cost o! t"e !inal outputA

Comments 4 R; sana 54=;/=5/=> =4:%C Very nice )uote S= R5 RAVI 8UMAR 54=;/4=/5C =4:;I t"anks )uote 4 R= saJlain 54=5/4C/55 =C:%I ,reat ?orkAAAAA keep it up )uote Re!res" comments list RSS !eed !or comments to t"is post

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