CHAPTER 26: Monopoly Behavior
MULTIPLE CHOICE
1. In Problem 1, if demand in the United States is given by Q1 = 7,200 − 300p1, where p1 is the price in
the United States, and if the demand in England is given by 3,600 − 200p2, where p2 is the price in
England, then the difference between the price charged in England and the price charged in the United
States will be
a.
$3.
b.
$6.
c.
$0.
d.
$13.
e.
$9.
2. In Problem 1, if demand in the United States is given by Q1 = 14,000 − 1,000p1, where p1 is the price
in the United States, and if the demand in England is given by 1,600 − 200p2, where p2 is the price in
England, then the difference between the price charged in England and the price charged in the United
States will be
a.
$8.
b.
$0.
c.
$3.
d.
$6.
e.
$9.
3. In Problem 1, if demand in the United States is given by Q1 = 13,200 − 600p1, where p1 is the price in
the United States, and if the demand in England is given by 9,000 − 500p2, where p2 is the price in
England, then the difference between the price charged in England and the price charged in the United
States will be
a.
$4.
b.
$2.
c.
$0.
d.
$12.
e.
$6.
4. In Problem 1, if demand in the United States is given by Q1 = 11,200 − 800p1, where p1 is the price in
the United States, and if the demand in England is given by 1,600 − 200p2, where p2 is the price in
England, then the difference between the price charged in England and the price charged in the United
States will be
a.
$8.
b.
$3.
c.
$6.
d.
$0.
e.
$9.
5. In Problem 1, if demand in the United States is given by Q1 = 18,000 − 900p1, where p1 is the price in
the United States, and if the demand in England is given by 2,000 − 200p2, where p2 is the price in
England, then the difference between the price charged in England and the price charged in the United
States will be
a.
$10.
b.
$0.
c.
$11.
d.
$5.
e.
$15.
6. If a monopolist faces an inverse demand curve, p(y) = 100 − 2y and has constant marginal costs of $32
and zero fixed costs and if this monopolist is able to practice perfect price discrimination, its total
profits will be
a.
$1,156.
b.
$17.
c.
$578.
d.
$1,734.
e.
$289.
7. If a monopolist faces an inverse demand curve, p(y) = 100 − 2y and has constant marginal costs of $4
and zero fixed costs and if this monopolist is able to practice perfect price discrimination, its total
profits will be
a.
$24.
b.
$3,456.
c.
$2,304.
d.
$1,152.
e.
$576.
8. If a monopolist faces an inverse demand curve, p(y) = 100 − 2y and has constant marginal costs of $8
and zero fixed costs and if this monopolist is able to practice perfect price discrimination, its total
profits will be
a.
$2,116.
b.
$23.
c.
$1,058.
d.
$3,174.
e.
$529.
9. If a monopolist faces an inverse demand curve, p(y) = 100 − 2y and has constant marginal costs of $24
and zero fixed costs and if this monopolist is able to practice perfect price discrimination, its total
profits will be
a.
$1,444.
b.
$19.
c.
$2,166.
d.
$722.
e.
$361.
10. If a monopolist faces an inverse demand curve, p(y) = 100 − 2y and has constant marginal costs of $16
and zero fixed costs and if this monopolist is able to practice perfect price discrimination, its total
profits will be
a.
$21.
b.
$1,764.
c.
$2,646.
d.
$882.
e.
$441.
11. A price-discriminating monopolist sells in two separate markets such that goods sold in one market are
never resold in the other. It charges $4 in one market and $9 in the other market. At these prices, the
price elasticity in the first market is −1.50 and the price elasticity in the second market is −0.40. Which
of the following actions is sure to raise the monopolist’s profits?
a.
Lower p2.
b.
Raise p2.
c.
Raise p1 and lower p2.
d.
Raise both p1 and p2.
e.
Raise p2 and lower p1.
12. A price-discriminating monopolist sells in two separate markets such that goods sold in one market are
never resold in the other. It charges $6 in one market and $11 in the other market. At these prices, the
price elasticity in the first market is −1.40 and the price elasticity in the second market is −0.90. Which
of the following actions is sure to raise the monopolist’s profits?
a.
Lower p2.
b.
Raise p1 and lower p2.
c.
Raise p2.
d.
Raise both p1 and p2.
e.
Raise p2 and lower p1.
13. A price-discriminating monopolist sells in two separate markets such that goods sold in one market are
never resold in the other. It charges $6 in one market and $8 in the other market. At these prices, the
price elasticity in the first market is −2.40 and the price elasticity in the second market is −0.70. Which
of the following actions is sure to raise the monopolist’s profits?
a.
Raise both p1 and p2.
b.
Raise p1 and lower p2.
c.
Raise p2.
d.
Lower p2.
e.
Raise p2 and lower p1.
14. A price-discriminating monopolist sells in two separate markets such that goods sold in one market are
never resold in the other. It charges $6 in one market and $8 in the other market. At these prices, the
price elasticity in the first market is −2.10 and the price elasticity in the second market is −0.40. Which
of the following actions is sure to raise the monopolist’s profits?
a.
Raise both p1 and p2.
b.
Raise p2.
c.
Lower p2.
d.
Raise p1 and lower p2.
e.
Raise p2 and lower p1.
15. A price-discriminating monopolist sells in two separate markets such that goods sold in one market are
never resold in the other. It charges $2 in one market and $12 in the other market. At these prices, the
price elasticity in the first market is −2.50 and the price elasticity in the second market is −0.70. Which
of the following actions is sure to raise the monopolist’s profits?
a.
Raise p2.
b.
Raise both p1 and p2.
c.
Lower p2.
d.
Raise p1 and lower p2.
e.
Raise p2 and lower p1.
16. Suppose that 2,000 people are interested in attending ElvisLand. Once a person arrives at ElvisLand,
his or her demand for rides is given by x = max5 − p, 0), where p is the price per ride. There is a
constant marginal cost of $2 for providing a ride at ElvisLand. If ElvisLand charges a
profit-maximizing two-part tariff, with one price for admission to ElvisLand and another price per ride
for those who get in. How much should it charge per ride and how much for admission?
a.
$2 per ride and $5 for admission
b.
$2 per ride and $4.50 for admission
c.
$0 per ride and $3 for admission
d.
$0 per ride and $6.50 for admission
e.
$5 per ride and $5 for admission
17. Suppose that 2,500 people are interested in attending ElvisLand. Once a person arrives at ElvisLand,
his or her demand for rides is given by x = max3 − p, 0 , where p is the price per ride. There is a
constant marginal cost of $2 for providing a ride at ElvisLand. ElvisLand charges a profit-maximizing
two-part tariff, with one price for admission to ElvisLand and another price per ride for those who get
in. How much should it charge per ride and how much for admission?
a.
$2 per ride and $3 for admission
b.
$0 per ride and $2.50 for admission
c.
$2 per ride and $.50 for admission
d.
$0 per ride and $1 for admission
e.
$3 per ride and $3 for admission
18. Suppose that 3,500 people are interested in attending ElvisLand. Once a person arrives at ElvisLand,
his or her demand for rides is given by x = max7 − p, 0 , where p is the price per ride. There is a
constant marginal cost of $3 for providing a ride at ElvisLand. ElvisLand charges a profit-maximizing
two-part tariff, with one price for admission to ElvisLand and another price per ride for those who get
in. How much should it charge per ride and how much for admission?
a.
$3 per ride and $7 for admission
b.
$0 per ride and $4 for admission
c.
$0 per ride and $11 for admission
d.
$3 per ride and $8 for admission
e.
$7 per ride and $7 for admission
19. Suppose that 3,500 people are interested in attending ElvisLand. Once a person arrives at ElvisLand,
his or her demand for rides is given by x = max2 − p, 0 , where p is the price per ride. There is a
constant marginal cost of $1 for providing a ride at ElvisLand. ElvisLand charges a profit-maximizing
two-part tariff, with one price for admission to ElvisLand and another price per ride for those who get
in. How much should it charge per ride and how much for admission?
a.
$1 per ride and $2 for admission
b.
$0 per ride and $1 for admission
c.
$1 per ride and $.50 for admission
d.
$0 per ride and $1.50 for admission
e.
$2 per ride and $2 for admission
20. Suppose that 1,000 people are interested in attending ElvisLand. Once a person arrives at ElvisLand,
his or her demand for rides is given by x = max6 − p, 0 , where p is the price per ride. There is a
constant marginal cost of $3 for providing a ride at ElvisLand. If ElvisLand charges a
profit-maximizing two-part tariff, with one price for admission to ElvisLand and another price per ride
for those who get in. How much should it charge per ride and how much for admission?
a.
$3 per ride and $6 for admission
b.
$3 per ride and $4.50 for admission
c.
$0 per ride and $3 for admission
d.
$0 per ride and $7.50 for admission
e.
$6 per ride and $6 for admission