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UA ACCT 200 - Exam 4 Review Slides

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Slide 1Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Exam 4Review SlidesIn the context of the Five Forces Industry Analysis, which of the following describes a situation of strong buyer power?A. Walmart’s rural customers in the 1980s had relatively little choice in where to shop.B. Airline customers are price sensitive and have little or no brand loyalty.C. Minimum efficient scale is very large in the automobile industry.D. Delta airlines purchases its airplanes in a market where there is only two major competitors, Boeing and Airbus.Which of the following is not a condition necessary for price discrimination to be successful?A. Market powerB. Inelastic demandC. The good cannot be easily resoldD. The firm can identify different demandsBig Buds Burgers has a constant MC of $4. The elasticity of demand for seniors citizens is -5 while the elasticity of demand for non-seniors is -3. To maximize profit Big Bud should charge seniorsA. $6 and non-seniors $9.B. $9 and non-seniors $6.C. $5 and non-seniors $6D. $4.5 and non-seniors $5Under perfect price discriminationA. Deadweight loss is zeroB. Consumer surplus is zeroC. Producer surplus is equal to total economic surplusD. All of the above.You have two different market segments in which you charge different prices. MC does not differ by segment. After selling all of your output you discover that in market segment 1 MR was 300 and in market segment 2 MR was 500. Did you maximize profit? If not, in which segment should you have allocated more output?A. Market 1B. Market 2C. Not possible to tellD. I love Sun Devils.You have two different market segments in which you charge the same price. In market 1 elasticity of demand is -3 and in market 2 elasticity of demand is -2. If you charge different prices, in which segment should you give the discount?A. Market 1B. Market 2C. Not possible to tellD. I don’t know but I love economicsSuppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA = 40 - 2QA, and the inverse demand curve for group B is PB = 30 – 0.5QB. The monopolist is able to produce the good for either type of customer at a constant marginal cost of 10, and the monopolist has no fixed costs. If the monopolist practices group price discrimination, the profit maximizing prices charged to each type of customer areA. PA = 20, and PB = 25.B. PA = 25 and PB = 20.C. PA = 15, and PB = 25.D. PA = 25, and PB =15.At the current price of a good, Anne’s consumer surplus equals 250, and Bill's consumer surplus equals 300. By using two-part pricing, a monopolist could increase his profit byA. 250B. 300C. 500D. 550If the firm does not change the per-unit use fee, what effect will the imposition of an access fee have on the amount that Bill purchases? Why?A profit maximizing monopolistically competitive firm is charging a price of $100 and has AC of $120. In the long run this firm can anticipate that A. The demand for the firm’s output will become more elasticB. the demand for the firm’s output will decreaseC. firms will exit the industryD. A & BWhat is true of both perfect competition and monopolistic competition?A. P=MC when maximizing profitB. Intense advertising competitionC. Firms produce at minimum efficient scaleD. Economic profit equals zero in the long runAssume a company can offer customers cable television and internet service at a marginal and average cost of $10. Also assume the company does not price discriminate. The following table shows each customer's marginal willingness to pay for television, internet services, and for a bundle containing both. If the company sells the products separately, which strategy yields the maximum profit? Charge ____ for television and _____ for internet.A. $12, $18B. $12, $24C. $20, $18D. $20, $24Television InternetAlison $20 $18Bob $12 $24Assume a company can offer customers cable television and internet service at a marginal and average cost of $10. Also assume the company does not price discriminate. The following table shows each customer's marginal willingness to pay for television, internet services, and for a bundle containing both. Which strategy yields the maximum profit, and what maximum profit is obtained? A. Sell separately and make a profit of $26B. Sell separately and make a profit of $20C. Bundle and make a profit of $36D. Bundle and make a profit of $32Television InternetAlison $20 $18Bob $12 $24Which of the following is true for Oligopoly?A. High barriers to entryB. High degree of interdependence between firmsC. Positive economic profits are possible in the long-runD. All of the aboveWhich of the following is true for a cartel?A. Each firm has an individual incentive to cooperate with the cartel.B. When firms cheat on a cartel total economic surplus decreases.C. For an individual firm cheating on the cartel agreement will be most profitable if all other firms continue to collude.D. None of the


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