Question

36. Some consumer surplus remains under each of the following EXCEPT                       

A) two-part pricing with multiple consumers

B) third-degree price discrimination

C) first-degree price discrimination

D) block pricing

37. In the case of an increasing cost industry in which consumer demand has decreased

A) the final, long run price will be higher than the price at the very beginning

B) the final, long run price will be lower than the price that first emerges in the short run after the decrease in demand, but in the short-run the price will become higher than the price at the very beginning

C) cost curves shift downward in the long run as firms exit the industry

D) none of the above

38. Which of the following would contribute to the emergence of an industry characterized by oligopoly?

A) the level of production consistent with minimum efficient scale is very small in comparison to the size of the overall market

B) barriers to entry that most firms would have difficulty overcoming

C) anti-trust laws that prevent most mergers

D) none of the above

39. When a profit-maximizing monopolist sells output in two distinct markets, which of the following is true?

A) Price will be higher in the market in which demand is unit-elastic.

B) Price will be lower in the market with the more elastic demand

C) Price will be equal in each market, as long as there is a constant marginal cost.

D) Price will be lower in the market for which there are fewer substitute goods.

40. With intertemporal price discrimination                                                               

A) each consumer is charged his/her full willingness to pay.

B) groups are charged different prices in accordance with the principles of third-degree price discrimination

C) monopolists capture all the consumer surplus.

D) Both A and C are true.

Answer 1

36. C) first-degree price discrimination

In this case, the price is equal to maximum willingness to pay of the consumer and hence zero consumer surplus.

37. A) the final, long run price will be higher than the price at the very beginning

Increasing cost industry means the average cost is increasing with increase in output due to diseconomies of scale.

38. B) barriers to entry that most firms would have difficulty overcoming

Oligopoly is characterized by a few firms who either compete or merge in the market. Entry barriers make it difficult for new entrants.

39. B) Price will be lower in the market with the more elastic demand

When demand is elastic, increase in price leads to large decrease in output and hence, total revenue declines. Thus, prices are kept low.

40. B) groups are charged different prices in accordance with the principles of third-degree price discrimination