Monopolistic Market Structures

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Which of the following is an example of third-degree price discrimination?

Charging different prices for different qualities of a product

Charging different prices based on the time of purchase

Charging different prices based on the quantity of a product

Charging different prices based on demographic traits of customers (correct)

What is an example of a product that is licensed using third-degree price discrimination?

Big-box retailer products

Airline tickets

Lunch club membership card

Econometric software (correct)

What is the purpose of price discrimination?

To charge less to customers who value the product highly

To charge different prices based on the time of purchase

To charge the same price to all customers

To charge more to customers who value the product highly (correct)

What is consumer surplus?

The difference between the price a consumer is willing to pay and the price a producer charges Signup and view all the answers

How can sellers extract consumer surplus through creative pricing schemes?

By offering fixed monthly fees for discounts Signup and view all the answers

What is the short-run factor that is fixed in the production process?

Capital investment Signup and view all the answers

What is the long-run solution that allows all inputs, including technology, to change?

Allowing all factors of production to vary Signup and view all the answers

What is one solution for maintaining a monopoly market position in the long run?

Nationalizing the monopoly Signup and view all the answers

What is the appropriate decision rule for a regulated monopoly?

Setting price equal to long-run average cost Signup and view all the answers

What is the purpose of providing a subsidy to a regulated monopoly?

To cover the average cost of production Signup and view all the answers

Which of the following is a challenge facing the regulator in determining the authentic risk-related return and the monopolist's realistic long-run average cost?

Determining the long-run success of the monopoly franchise Signup and view all the answers

What is the final solution proposed to address the challenge mentioned in the text?

Franchising the monopolistic firm through a bidding war Signup and view all the answers

Which of the following is an example of a government franchise mentioned in the text?

Retail outlets at rail stations and airports and concession outlets at stadiums Signup and view all the answers

What does the long-run success of the monopoly franchise depend on?

Meeting the goal of pricing products at the level of long-run average cost Signup and view all the answers

What is the public goal in selecting the winning firm for the franchise?

Price equaling long-run average cost Signup and view all the answers

Which of the following is NOT mentioned as an example of a government franchise?

Selecting the winning firm based on price Signup and view all the answers

What is the main factor that the regulator needs to determine in relation to the monopolist's cost?

Realistic long-run average cost Signup and view all the answers

What is the purpose of franchising the monopolistic firm through a bidding war?

To meet the goal of pricing products at the level of long-run average cost Signup and view all the answers

What is the relationship between the price and the long-run average cost in the selection of the winning firm?

Price is equal to long-run average cost Signup and view all the answers

What is the goal of the monopoly franchise in pricing its products?

To meet the goal of pricing products at the level of long-run average cost Signup and view all the answers

Which type of monopolist charges prices and supplies quantities that are the same as they would be in perfect competition?

Monopolist with perfect price discrimination Signup and view all the answers

What is the scenario called when a monopolist charges each customer the highest price the customer is willing to pay?

First-degree price discrimination Signup and view all the answers

In second-degree price discrimination, what mechanisms does the monopolist use to induce customers to self-select based on how highly they value the product?

Product bundling Signup and view all the answers

Which type of monopolist offers a menu of quantity-based pricing options?

Monopolist with second-degree price discrimination Signup and view all the answers

What is the opposite extreme of a monopolist that charges prices and supplies quantities that are the same as they would be in perfect competition?

Monopolist that extracts the entire consumer surplus Signup and view all the answers

What is the scenario called when a monopolist can capture the entire consumer surplus by knowing the exact demand schedule of the customer?

Perfect price discrimination Signup and view all the answers

What is another possibility for a monopolist to extract the entire consumer surplus?

Public price disclosure Signup and view all the answers

In second-degree price discrimination, what type of pricing options are designed to induce customers to self-select based on how highly they value the product?

Volume discounts Signup and view all the answers

Which type of monopolist charges a different price to each client?

Monopolist with first-degree price discrimination Signup and view all the answers

Which type of monopolist can measure how often the product is used and charge the customer the highest price the consumer is willing to pay for that unit of good?