C211 - Practice Competency 3

Price discrimination is the business practice of

• selling the same good at different prices to different customers.

• hiring marketing experts to increase consumers' brand loyalty.

• pricing above marginal cost.

• bundling related products to increase total sales.

A firm's opportunity costs of production are equal to its

• implicit costs only.

• explicit costs + implicit costs.

• explicit costs only.

• explicit costs + implicit costs + total revenue.

Price discrimination adds to social welfare in the form of

• increased consumer surplus and decreased producer surplus.

• increased total surplus.

• reduced costs of production.

• decreased total surplus

Which of the following statements is true?

• Average revenue is the same as price for competitive firms but not monopoly firms.

• When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price.

• Average revenue is the same as price for monopoly firms but not competitive firms.

• When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.

Which of the following statements regarding a competitive firm is correct?

• Because each firm faces a  downward sloping demand, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.

• For all firms, average revenue equals the price of the good.

• By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.

• If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

• more than triple

• be reduced by one third.

• exactly triple.

• less than triple.

Which of the following is a necessary characteristic of a monopoly?

• The firm is the sole seller of its product.

• The firm generates a large economic profit.

• The firm's product has many close substitutes.

• The firm is located in a small geographic market.

Which of the following statements is not correct?

• Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly.

• Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly.

• Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry.

• Both monopolistic competition and perfect competition are characterized by product differentiation.

To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where

• MR = MC.

• MR exceeds MC by the greatest amount.

• MR intersects the demand curve.

• MC intersects the demand curve.

Antitrust laws have economic benefits that outweigh the costs if they

• prevent mergers that would decrease competition and raise the costs of production.

• allow mergers that would decrease competition regardless of what happens to the costs of production.

• prevent mergers that would decrease competition and lower the costs of production.

• allow mergers that would decrease competition and raise the costs of production.