30 Questions
Which of the following is an example of third-degree price discrimination?
Charging different prices based on demographic traits of customers
What is an example of a product that is licensed using third-degree price discrimination?
Econometric software
What is the purpose of price discrimination?
To charge more to customers who value the product highly
What is consumer surplus?
The difference between the price a consumer is willing to pay and the price a producer charges
How can sellers extract consumer surplus through creative pricing schemes?
By offering fixed monthly fees for discounts
What is the short-run factor that is fixed in the production process?
Capital investment
What is the long-run solution that allows all inputs, including technology, to change?
Allowing all factors of production to vary
What is one solution for maintaining a monopoly market position in the long run?
Nationalizing the monopoly
What is the appropriate decision rule for a regulated monopoly?
Setting price equal to long-run average cost
What is the purpose of providing a subsidy to a regulated monopoly?
To cover the average cost of production
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
What is the final solution proposed to address the challenge mentioned in the text?
Franchising the monopolistic firm through a bidding war
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
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
What is the public goal in selecting the winning firm for the franchise?
Price equaling long-run average cost
Which of the following is NOT mentioned as an example of a government franchise?
Selecting the winning firm based on price
What is the main factor that the regulator needs to determine in relation to the monopolist's cost?
Realistic long-run average cost
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
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
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
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
What is the scenario called when a monopolist charges each customer the highest price the customer is willing to pay?
First-degree price discrimination
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
Which type of monopolist offers a menu of quantity-based pricing options?
Monopolist with second-degree price discrimination
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
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
What is another possibility for a monopolist to extract the entire consumer surplus?
Public price disclosure
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
Which type of monopolist charges a different price to each client?
Monopolist with first-degree price discrimination
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?
Monopolist with first-degree price discrimination
Test your understanding of monopolistic market structures and their impact on pricing and quantity. Explore scenarios ranging from perfect competition to regulated monopolies and threat of entry.
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