1. A firm engages in price discrimination when it:
A. charges different prices for different units of different goods.
2. A monopolist can perfectly price discriminate:
A. when it can distinguish consumers with a high versus low willingness to pay.
3. Price discrimination is based on observable customer characteristics:
D. in all cases.
4. Price discrimination is based on self-selection:
D. when monopolists decide for themselves whether to engage in price discrimination.
5. When a firm charges more per ounce for a small bottle of ketchup than for a larger one, it
is engaging in:
A. price discrimination based on observable customer characteristics.
6. Perfect price discrimination means:
D. charging each consumer a price exactly equal to the marginal cost of selling the good to that
consumer.
7. Under perfect price discrimination the monopolist produces ________ a perfectly
competitive market.
A. the same amount of output as a non-discriminating monopolist as well as
8. Under a perfectly price discriminating monopolist, each consumer consumes ________ a
perfectly competitive market.
A. the same amount of output as they would under a non-discriminating monopolist as well as
9. With a two-part tariff:
D. consumers simply pay a fee for the right to buy anything.
10. A telephone company that charges both a monthly fee plus a price per minute used are
employing:
A. price discrimination based on observable customer characteristics.
11. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.25 per minute, how
many minutes will each customer buy each month?
D. 225
12. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.25 per minute, how
large of a fixed monthly fee can it charge and still persuade customers to buy their service?
D. $175
13. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.25 per minute and
the largest fixed fee that it can, what is Always There’s profit per customer?
D. $175
14. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.25 per minute and
the largest fixed fee that it can, what is Always There’s total profit?
D. $35,000
15. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.50 per minute, how
many minutes will each customer buy each month?
D. 250
16. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.50 per minute, how
large of a fixed monthly fee can it charge and still persuade customers to buy their service?
A. $200
17. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.50 per minute and
the largest fixed fee that it can, what is Always There’s profit per customer?
D. $37.50
18. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.50 per minute and
the largest fixed fee that it can, what is Always There’s total profit?
D. $7,500
19. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.50 per minute and
the largest fixed fee that it can at that price, what is the difference in profit per customer
compared to when it charges $0.25 per minute and the largest fixed fee that it can at that price?
A. Profit per customer is the same in both cases, and it is equal to zero.
20. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
Q
d
= 200 – 100
P
, where
P
is
the per-minute price in dollars and
Q
is the number of wireless minutes. The marginal cost of
providing the wireless service is $0.25 per minute. If Always There charges $0.50 per minute and
the largest fixed fee that it can at that price, what is the difference in total profit compared to
when it charges $0.25 per minute and the largest fixed fee that it can at that price?
A. Profit is the same in both cases, and it is equal to zero.
21. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. Suppose the movie theater can price discriminate. How many tickets does the theater
sell to students to maximize profits?
A. 2500
22. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. Suppose the movie theater can price discriminate. What price per ticket does the
theater charge students to maximize profits?
D. $12
23. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. Suppose the movie theater can price discriminate. What is the monopolist’s profit from
students?
D. $0
24. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. Suppose the movie theater can price discriminate. How many tickets does the theater
sell to adults to maximize profits?
D. 600
25. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. Suppose the movie theater can price discriminate. What price per ticket does the
theater charge adults to maximize profits?
D. $12
26. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. Suppose the movie theater can price discriminate. What is the monopolist’s profit from
adults?
A. $400
27. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. Suppose the movie theater can price discriminate. What is the monopolist’s profit from
both students and adults?
D. $4,900
28. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. Suppose the movie theater cannot price discriminate. What is the monopolist’s profit
from both students and adults?
A. $2,500
29. A movie monopolist sells to students and adults. The demand function for students is
Q
dS
= 600 – 100
P
and the demand function for adults is
Q
dA
= 1,200 – 100
P
. The marginal cost is $2
per ticket. What is the difference in the monopolist’s profit when it is able to price discriminate
and when it cannot?
D. $50
30. If a monopoly is price discriminating between two groups, A and B, based on observable
customer characteristics, there
is
no
difference in the marginal cost of selling to the two groups,
and the elasticity of demand for group A is -1.5 while the elasticity of demand for group B is -2.1,
which of the following is true?
D. The price for group A customers will be higher than for group B customers, but there is not
enough information to determine which markup will be higher.
31. If a monopoly is price discriminating between two groups, A and B, based on observable
customer characteristics, there
is
a difference in the marginal cost of selling to the two groups,
and the elasticity of demand for group A is -1.5 while the elasticity of demand for group B is -2.1,
which of the following is true?
A. The markup and price for group A customers will be higher than for group B customers.