TAMUC Eco562 final exam 2105

| November 9, 2018

1. In the market structure called monopolistic competition
(Points : 1.25)
a) Very little
advertising will occur
b) There are
only a few companies in the industry
c) These
industries offer only few products
d) None of the
above

Question 2. 2. In a purely competitive industry (Points :
1.25)
a) Products
are differentiated
b) A large
amount of advertising occurs
c) Price will
be higher than in other market structure
d) None of the
above

Question 3. 3. A used lawn mower is an example of (Points :
1.25)
a) a search
good
b) an
experience good
c) a
homogenous good
d) None of the
above

Question 4. 4. The problem of asymmetric can be overcome by
(Points : 1.25)
a) Reputation
b) Brand name
c) Warranties
d) All of the
above
e) None of the
above

Question 5. 5. A monopolist will always charge a higher
price than a purely competitive industry (Points : 1.25)
True
False

Question 6. 6. Given TC = 10 + 5Q, Ed = -2, what price will
be a monopolist charge? (Points : 1.25)
a) 5
b) 12
c) 8
d) 10
e) None of the
above
7. The monopolist determines optimal output the same way as
does a purely competitive industry (Points : 1.25)
True
False

Question 8. 8. Given a company with some monopoly power and
Ed=3, the optimal markup is (Points : 1.25)
a) 33%
b) 50%
c) 72%
d) None of the
above

Question 9. 9. Given the information given in 8 above and
MC=6, gross margin is (Points : 1.25)
a) 50%
b) 42%
c) 33%
d) 38%
e) None of the
above

Question 10. 10. You would expect gross margin in a store
brand to be higher than gross margin in a brand name product (Points : 1.25)
True
False

Question 11. 11. You expect products that are less price
elastic to have lower gross margins than products with greater price elasticity
(Points : 1.25)
True
False

Question 12. 12. A company with large gross margins will
have large profits (Points : 1.25)
True
False
13. If a company is incurring losses, it should stop
operating (Points : 1.25)
a) Yes
b) No
c) Not enough
information

Question 14. 14. A monopolist may not charge the highest
price they could get (at MR=MC) in the short run (Points : 1.25)
True
False

Question 15. 15. All price discrimination is illegal (Points
: 1.25)
True
False

Question 16. 16. A company that faces different levels of
demand (different price elasticities) (Points : 1.25)
a) Must charge
the same price to all customers
b) is
violating the law
c) Can charge
different price to customers

Question 17. 17. Patents allow a company the exclusive right
to act as a monopolist (Points : 1.25)
a) This is not
justified economically
b) It is
justified economically

Question 18. 18. The kinked demand curve model was developed
to help explain: (Points : 1.25)
a)
fluctuations of prices in pure competition
b) rigidities
observed in prices in oligopolistic industries
c) fluctuations observed in prices in
oligopolistic industries
d) all of the
above
e) none of the
above

Question 19. 19. If a cartel seeks to maximize profits, the
market share (or quota) for each firm should be set at a level such that the
_____ of all firms is identical. (Points : 1.25)
a) average
total cost
b) average
profit
c) marginal
profit
d) marginal
cost
e)marginal
revenue

Question 20. 20. Factors that affect the ability of
oligopolistic firms to successfully engage in cooperation
include_________________. (Points : 1.25)
a) number and
size distribution of sellers
b) size and
frequency of orders
c) product
heterogeneity
d) a and b
only
e) a, b, and c
21. Joint products are: (Points : 1.25)
a) products
which are technically independent in the production process
b) exemplified
by beef and hide from cattle
c) products
whose production processes are interdependent
d) a and b
e) b and c

Question 22. 22. In _________ price discrimination, the
monopolist charges each consumer the highest price that purchaser is willing to
pay for each unit purchased (provided that this price exceeds the marginal cost
of production). (Points : 1.25)
a)
first-degree
b)
second-degree

Question 23. 23. ___________ is a new product pricing
strategy which results in a high initial product price. This price is reduced
over time as demand at the higher price is satisfied. (Points : 1.25)
a) Prestige
pricing
b) Price
lining
c) Skimming
d) Incremental
pricing
e) None of the
above

Question 24. 24. ____________ is the price at which an
intermediate good or service is transferred from the selling to the buying
division within the same firm. (Points : 1.25)
a) Incremental
price
b) Marginal
price
c) Full-cost
price
d) Transfer
price
e) none of the
above

Question 25. 25. For a monopolist that engages in price
discrimination, when the price elasticity in market 1 is less (in absolute
value) than in market 2, the optimal price in market 1 will exceed the optimal
price in market 2. (Points : 1.25)
a) Ture
b) False

Question 26. 26. To maximize profits, a monopolist that
engages in price discrimination must allocate output in such a way as to make
identical the_________in all markets. (Points : 1.25)
a) ratio of
price to marginal cost
b) ratio of
marginal cost to marginal utility
c) ratio of
price to elasticity
d) marginal
revenue
e) none of the
above

Question 27. 27. The segmenting of customers into several
small groups such as household, institutional, commercial, and industrial
users, and establishing a different rate schedule for each group is known as:
(Points : 1.25)
a)
first-degree price discrimination
b) market
penetration
c)
third-degree price discrimination
d)
second-degree price discrimination
e) none of the
above

Question 28. 28. Transfer pricing: (Points : 1.25)
a) is typical
of a centralized firm
b) assumes no
external sources available
c) should
maximize a division’s profits, rather than the firm’s
d) can exist
with or without an external competitive market
e) none of the
above

Question 29. 29. A company sells 20,000 pairs of jeans a
year at an average price of $10. Fixed costs are $60,000 and total variable
costs are $120,000. They estimate that a 10% increase in output would not
affect fixed cost but would reduce average variable costs by 40 cents. Someone
suggests reducing price by 5% to increase sales and project. The price
elasticity of demand (ARC) is -2.
The impact on total revenue would be: (Points : 1.25)
a) a decrease
of $10,000
b) an increase
of $10,000
c) an increase
of $180,000
d) None above

Question 30. 30. Given the information in (29) above. The
change in total costs would be: (Points : 1.25)
a) a decrease
of $3,500
b) an increase
of $ 3,800
c) an increase
of $180,000
d) None above
31. Given the information in (29) above. The effect on
profit would be: (Points : 1.25)
a) an increase
of $42,000
b) a decrease
of $6,200
c) an increase
of 50,000
d) an increase
of $6,200
e) None above

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