Monopoly power explains the firm's ability to:

• A) Equate marginal cost to marginal revenue.
• B) Set price above average variable cost.
• C) Set price above marginal cost.
• D) Set price equal to marginal cost.

A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of:

• A) Tying.
• B) Peak-load pricing.
• C) Second-degree price discrimination.
• D) A two-part tariff.

The monopolist has no supply curve because:

• A) The relationship between price and quantity depends on both marginal cost and average cost.
• B) The monopolist's marginal cost curve changes considerably over time.
• C) The quantity supplied at any particular price depends on the monopolist's demand curve.
• D) There is a single seller in the market.

When a firm charges each customer the maximum price that the customer is willing to pay, the firm:

• A) Engages in a discrete pricing strategy.
• B) Charges the average reservation price.
• C) Engages in second-degree price discrimination.
• D) Engages in first-degree price discrimination.

All of the following factors determine the degree of monopsony power EXCEPT:

• A) Interaction among buyers
• B) Elasticity of market supply
• C) Elasticity of market demand
• D) Number of buyers in the market

Elasticity of supply is represented by Es and own price elasticity of demand by Ed, the fraction of the tax passed on to consumers in the form of higher prices is:

• A) Es/(Es-Ed).
• B) Es/(Ed-Es).
• C) Ed/(Ed-Es).
• D) Ed/(Es-Ed).

Discrimination based upon the quantity consumed is referred to as ______________ price discrimination.

• A) First-degree
• B) Third-degree
• C) Second degree
• D) Group

The benefit of a subsidy accrues mostly to consumers:

• A) If Ed and Es are equal.
• B) In every instance.
• C) If Ed/Es is small.
• D) If Ed/Es is large.

Which of the following is NOT associated with a high degree of monopoly power?

• A) A small number of firms in the market.
• B) Significant barriers to entry.
• C) Significant price competition among firms in the market.
• D) A relatively inelastic demand curve for the firm.

Suppose total revenue of a monopolist increases from Rs.105 to Rs.108 as a result of increase in output from 3 units to 4 units. The marginal revenue for the 4th unit will be:

• A) 3
• B) 2
• C) 8
• D) 4

When a company introduces new audio products, it often initially sets the price high and about a year later it lowers the price. This is an example of:

• A) A two-part tariff.
• B) Second-degree price discrimination.
• C) Intertemporal price discrimination.
• D) First-degree price discrimination.

When government imposes per unit tax on the output level produced by a monopolist, the resulting price increase will:

• A) Always be less than the tax.
• B) Always be more than the tax.
• C) Always be less than if a similar tax were imposed on firms in a competitive market.
• D) Not always be less than the tax.

Third-degree price discrimination involves:

• A) Charging each consumer the same two part tariff.
• B) Charging lower prices the greater the quantity purchased.
• C) The use of increasing block rate pricing.
• D) Charging different prices to different groups based upon differences in elasticity of demand.

What will be the result of an increase in import tariff?

• A) Higher domestic price.
• B) Loss of consumer surplus.
• C) All of the given options.
• D) A deadweight loss.

Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?

• A) When there are many firms in the market and the demand curve faced by each firm is relatively elastic.
• B) When there are many firms in the market and the demand curve faced by each firm is relatively inelastic.
• C) When there are few firms in the market and the demand curve faced by each firm is relatively elastic.
• D) When there are few firms in the market and the demand curve faced by each firm is relatively inelastic.

The rule of thumb for pricing is:

• A) P=1/Ed
• B) P=1+Ed
• C) P=MC/Ed
• D) P=MC/ 1+ (1/Ed)

An electric power company uses block pricing for electricity sales. Block pricing is an example of:

• A) First-degree price discrimination.
• B) Block pricing is not a type of price discrimination.
• C) Third-degree price discrimination.
• D) Second-degree price discrimination.

Average revenue for a monopolist is:

• A) Greater than price.
• B) Less than marginal revenue.
• C) Greater than marginal revenue.
• D) Equal to marginal revenue.

The profit maximizing rule MC = MR is followed by:

• A) A perfectly competitive firm, but not a monopoly.
• B) Both a monopoly and a perfectly competitive firm.
• C) Neither a monopoly nor a perfectly competitive firm.
• D) A monopoly, but not a perfectly competitive firm.

The sum over all units produced of the difference between market price of the good and firm’s marginal cost of production is:

• A) Marginal revenue.
• B) Producer surplus.
• C) Maximum profit.
• D) Total revenue.