Compared to the monopoly outcome with a single price, imperfect price Any of the

Question

Compared to the monopoly outcome with a single price, imperfect price Any of these outcomes is possible. The socially efficient level of production occurs where the marginal cost carve intersects which of the following curves? Average variable com Average total cost Demand Marginal revenue When an industry is a natural monopoly. it is characterized by constant returns to scale. it is characterized by diseconomies of scale. a larger number of firms may lead to a lower average cost. a larger number of firms will lead to a higher average cost Assume that a local bonk sells two services, checking accounts and ATM card services. Mr. is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. is willing to pay only $5 for a cheeking account, but is willing to pay S9 for unlimited use of her A Assume that the bank can provide each of these services at zero marginal cost If (be bank is unable to use tying, what is the profit-maximizing price to charge for a checking account? a. $13 $9 $8 $5 If the bank is unable to use tying, what is the profit-maximizing price to charge for unlimited use of an ATM card? $14 $11 $9 $2 If the bank is able to use tying to price checking account and ATM services, what is the profit-maximizing price to charge for the "tied" good? $14 $10 $9 $8 How much additional profit can the bank earn by switching to the use of a tying to price checking accounts and ATM service rather than pricing these services separately? $14 $11 $7 $1 Predatory pricing occurs when a firm exercises its oligopoly power by raising its price through the formation of a cartel exercises its monopoly power by raising its price. cuts its prices in order make itself more competitive. cuts its prices temporarily in order to drive out any competition.

Explanation / Answer

1. a) (i) and (ii)

2. d) Marginal revenue

3. d) a large number of firms will lead to higher average cost.

4. d) $ 5 because at this price both customers will take the service of checking accounts.

5. c) $ 9

6. b) $ 10

7. d) $ 1

8. d) cuts its prices temporarily in order to drive out any competition.

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