1. Price discrimination refers to: A. selling a given product for different pric
ID: 1228842 • Letter: 1
Question
1. Price discrimination refers to:
A. selling a given product for different prices at two different points in time.
B. any price above that which is equal to a minimum average total cost.
C. the selling of a given product at different prices that do not reflect cost differences.
D. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.
E. None of the above
2. The "free-rider problem" refers to the fact that:
A. government subsidizes the fares of many municipal mass-transit systems.
B. government arbitrarily attaches excise taxes to a select list of goods and services.
C. the benefits associated with public goods cannot be denied to those who are unwilling to pay for them.
D. homeless people expect free rides on lynx buses.
E. None of the above
3. The law of diminishing marginal utility states that:
A. total utility is maximized when consumers get the same amount of utility per unit (not per dollar) of each product consumed.
B. beyond some point additional units of a product will yield less and less extra satisfaction to a consumer.
C. price must be lowered to induce firms to supply more of a product.
D. it will take larger and larger amounts of resources beyond some point to produce successive units of a product.
E. None of the above
4. Cesar Saladino likes rum. The first shot of rum yields him 18 units of utility; the second yields him 12 more units of utility. If he drank a third shot, his total utility from the 3 drinks would be 38 units of utility. The marginal utility of the third shot would be:
A. 38 units of utility.
B. 30 units of utility.
C. 8 units of utility.
D. zero, even though he still wouldn’t be drunk.
E. None of the above
5. In the long run, what will occur in a monopoly?
A. Economic profits will be eliminated by the entry of rival firms
B. Economic profits will be reduced, but not eliminated entirely, by the entry of rival firms
C. Entry will not occur
D. All of the above may be true
E. None of the above is true
6. If your agricultural co-op has the only known source of a unique cocoa bean needed to make chocolate-covered peanuts, what would your monopoly result from?
A. Sunk costs
B. Location
C. Ownership of inputs
D. Government restrictions
E. None of the above
Explanation / Answer
1. D. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge. 2. C. the benefits associated with public goods cannot be denied to those who are unwilling to pay for them. 3. B. beyond some point additional units of a product will yield less and less extra satisfaction to a consumer. 4. 38 - 12 -18 = 8 C. 8 units of utility. 5. C. Entry will not occur 6. C. Ownership of inputs
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