BEPP 250 Lecture Notes - Lecture 17: Reservation Price
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1).
A consumer spends more time searching for a good when her reservation price is:
increased.
reduced.
fixed.
None of the statements is correct.
2).
In the game shown below, firms 1 and 2 must independently decide whether to charge high or low prices.
Which of the following are Nash equilibrium payoffs in the one-shot game?
(0, 0)
(5, -5)
(-5, 5)
(10, 10)
3).
A risk-neutral individual would:
prefer $5 with certainty to a risky prospect with the expected value of $5.
prefer a risky prospect with an expected value of $5 to a certain amount of $5.
be indifferent between a risky prospect with an expect value of $5 to a certain amount of $5.
prefer a risky prospect with the expected value of $0.50 to $5 with certainty.
4).
Snowpeak Ski Resort offers a price for a lift ticket that is barely over its marginal cost, but the high equipment rental fee keeps generating big profits. Which pricing strategy is the management using?
Price discrimination
Two-part pricing
Commodity bundling
Cross-subsidization
5).
The short run is defined as the time frame:
in which there are no fixed factors of production.
in which there are fixed factors of production.
less than one year.
less than three years.
6).
Fixed costs exist only in:
the long run.
capital-intensive markets.
the short run.
labor-intensive markets.
7).
Top of Form
Non-fed ground beef is an inferior good. In economic booms, grocery managers should:
increase their orders of non-fed ground beef.
reduce their orders of non-fed ground beef.
not change their orders of non-fed ground beef.
neither increase, reduce, nor maintain their current orders for non-fed ground beef.
Bottom of Form
8).
Which of the following pricing strategies is NOT used in markets with special cost and demand structures?
Peak-load pricing
Cross-subsidization
Transfer pricing
Low-price guarantees
9).
A perfectly competitive firm faces a:
perfectly elastic demand function.
perfectly inelastic demand function.
demand function with unitary elasticity.
None of the answers is correct.
10).
The special demand structure that induces a firm to use a cross-subsidization strategy is:
perfect substitution among products.
imperfect substitution among products.
independent demand for products.
interdependent demand for products.
11).
Which of the following factors reduces the need for government involvement in the marketplace?
The presence of externalities
The incentive to rent-seek
The need for public goods
Incomplete information
12).
Which of the following statements is true?
A mineral rights auction is not the same as a common-value auction.
An auctioneer is always indifferent between different kinds of auctions.
The Dutch and first-price, sealed-bid auctions are strategically equivalent.
An English auction always yields lower expected revenues than a second-price, sealed-bid auction.
13).
Which of the following is true concerning negative externalities?
Firms tend to produce more than the efficient level of output.
Society gains because firms do not pay the external costs of production.
Perfect competition is better than monopoly from the viewpoint of society even in the presence of negative externalities.
With negative externalities, a monopoly will always produce an output level less than is socially efficient.
14).
Which of the following is true under monopoly?
P > ATC
P > MC
P = MR
P = ATC
15).
Differentiated goods are NOT a feature of a:
perfectly competitive market.
monopolistically competitive market.
monopolistic market.
perfectly competitive market and monopolistic market.
16).
Producer surplus is measured as the area
below the demand curve and above the market price.
above the demand curve and below the market price.
above the supply curve and below the market price.
below the supply curve and above the market price.
17).
Jaynet spends $25,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm â one offer was for $105,000 per year, and the other was for $85,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 30 paintings per year at a price of $9,000 each:
a. What are her accounting profits?
$
b. What are her economic profits?
$
18).
You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1âs elasticity of demand is -2, while group 2âs is -4. Your marginal cost of producing the product is $40.
a. Determine your optimal markups and prices under third-degree price discrimination.
Instruction: Round your answers to two decimal places.
Markup for group 1:
Price for group 1: $
Markup for group 2:
Price for group 2: $
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.
Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.
At least one group has elasticity of demand less than one in absolute value. | |
There are two different groups with different (and identifiable) elasticities of demand. | |
We are able to prevent resale between the groups. | |
At least one group has elasticity of demand greater than 1 in absolute value. |
19).
You are the manager of a firm that receives revenues of $60,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -1.5, and the cross-price elasticity of demand between productY and X is -1.4.
How much will your firm's total revenues (revenues from both products) change if you increase the price of good X by 2 percent?
Instructions: Round your answer to the nearest dollar. Include a minus (-) sign if applicable.
$
Question 26 pts
Which of the following is not a reason why specialization and trade are beneficial to society?
Specialization fosters learning by doing, thus lowering the unit-costs of products | |
Firms and workers become less dependent on others for producing goods and services |
The total output of economic goods may be increased even without any increase in resources | |
Scarce resources are utilized more efficiently by exploiting differences among them |
Question 27 pts
Laissez-faire capitalism limits the government's economic functions to the following, except:
Protecting private property rights | |
Establishing a legal environment to enforce contracts among individuals |
Setting prices of individual goods and services | |
Preventing individuals and firms from coercing others |
Question 28 pts
A production system where various workers concentrate on different specialized tasks to contribute towards a whole product is referred to as:
Roundabout production | |
A coincidence of wants |
Freedom of enterprise | |
Division of labor |
Question 29 pts
The market system is said to be characterized by "consumer sovereignty." This is because:
A sovereign government determines which consumer goods will be produced | |
Firms must match their production decisions to the consumers' choices |
The prices of consumer goods are regulated by a sovereign government | |
Consumer goods are considered to be more important than capital goods |
Question 30 pts
Consumers express self-interest when they:
Seek the lowest price for a product | |
Reduce business losses |
Exclude others in their thinking | |
Collect economic profits |
Question 311 pts
Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:
Point 5 to point 1 | |
Point 4 to point 1 |
Point 2 to point 5 | |
Point 4 to point 6 |
Question 32 pts
The table below shows the weekly demand for hamburger in a market where there are just three buyers.
Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:
17 | |
23 |
24 | |
18 |
Question 33pts
If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n):
Movement up along the current supply curve of corn | |
Movement down along the current supply curve of corn |
Leftward shift in the current supply of corn | |
Rightward shift in the current supply of corn |
Question 34 pts
Which of the following will not cause the supply curve to shift?
A technological change in the production of the good | |
A change in the prices of other goods that producers could be producing |
A change in the costs of resources needed to produce the good | |
A change in the price of the good |
Question 35 pts
All of the following would affect the position of the supply curve for cranberries, except the:
Price of agricultural land for cranberries | |
Cost of fertilizers for cranberry production |
Popularity of cranberry drinks | |
Development of a new pest control for cranberries |
Question 36 pts
When high-school and college graduates apply for jobs in the labor markets,
Job applicants and employers are both "buyers". | |
Job applicants are the "sellers" while employers are the "buyers". |
Job applicants and employers are both "sellers". | |
Job applicants are the "buyers" while employers are the "sellers". |
Question 37 pts
Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S1 to S2?
A decrease in consumer incomes, assuming corn is a normal good | |
The development of a more effective insecticide against corn rootworm |
An increase in the price of fertilizer | |
A change in consumer tastes away from cornbread |
Question 38 pts
Which is of the following statements is correct?
If demand increases, then price will decrease | |
If demand decreases, then price will decrease |
If price decreases, then demand will decrease | |
If price increases, then demand will decrease |
Question 39 pts
Which would be a likely cause of an increase in the demand for pizza?
A decrease in the price of hamburger sandwiches | |
A health report showing eating pizza reduces stress |
A reduced desire for take-out and fast-food dining | |
A decrease in the prices of cheese, pepperoni, and mushrooms |
Question 40 pts
A market for a product reaches equilibrium when:
Price falls further after there is a shortage | |
The price rises further after there is a surplus |
Buyers intend to buy a quantity equal to the quantity that sellers intend to sell | |
The actual quantity bought by buyers equals actual quantity sold by sellers |
Question 41 pts
A higher price reduces the quantity demanded for a product because:
Individuals can afford less of the product and will switch to substitutes | |
The financial assets of individuals increase |
Individuals will buy more of the product and less of its substitutes | |
The purchasing power of individuals increases |
Question 42 pts
The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?
Price of electric cars | |
How much sellers are charging customers for electric cars |
Price of gasoline cars | |
Quantity of electric cars demanded by buyers |
Question 43 pts
Use the following graph of the demand for coffee:
Refer to the above diagram of three demand curves for coffee. An increase in the price of coffee, other factors constant, would cause a:
Movement from point a to point b | |
Movement from point b to point a |
Shift from D1 to D2 | |
Shift from D1 to D3 |
Question 44 pts
Which of the following factors will decrease the current demand for a product?
A decrease in the current price of a complementary product | |
A decrease in the current price of a substitute product |
An increase in the current price of a substitute product | |
An expected increase in the future price of the product |
Question 45pts
In competitive markets, a surplus or shortage will:
Cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage | |
Cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage |
Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage | |
Never exist because the markets are always at equilibrium |
Question 46 pts
Which of the following would cause a leftward shift in the supply curve for car washes?
A decrease in taxes on car washes | |
An increase in the price of car washing equipment |
A decrease in the price of water | |
An increase in the number of cars in the city |
Question 47pts
The market system automatically corrects a surplus condition in a competitive market by:
Raising the price of the commodity in question while decreasing the quantity demanded | |
Raising the price of the commodity in question while increasing the quantity demanded |
Reducing the price of the commodity in question while increasing the quantity demanded | |
Reducing the price of the commodity in question while decreasing the quantity demanded |
Question 48 pts
A leftward shift of the supply curve for oil in the United States is most likely to result from:
A decrease in the world price of oil | |
An increase in the costs of exploration and drilling for oil |
An increase in the subsidy for oil exploration and drilling | |
A decrease in the fees that oil companies must pay for drilling licenses |
Question 49 pts
A fall in the price of milk, used in the production of ice cream, will:
Decrease the supply of ice cream | |
Have no effect on the supply of ice cream |
Increase the supply of ice cream | |
Cause a movement along the supply curve of ice cream |
Question 50 pts
Refer to the above graph, which shows the market for beef where demand shifted from D1 and D2. The change in equilibrium from E1 to E2 is most likely to result from:
An increase in the cost of cattle feed | |
A decrease in consumer incomes |
A decrease in the tax on beef products | |
An increase in the price of pork |