12.6 Restoring Efficiency
1) Which of the following statements is true?
A) Under monopoly, the seller sets the price of its good below marginal costs.
B) Under perfect competition, sellers set the price of their goods below marginal costs.
C) Under monopoly, prospective buyers may not be able to buy a good even if they have a willingness to pay above marginal costs.
D) Under perfect competition, prospective buyers may not be able to buy a good even if they have a willingness to pay above marginal costs.
2) Which of the following does a social planner necessarily need to know to restore efficiency in a monopoly market?
A) The monopolist’s marginal costs only
B) The buyers’ demand for a close substitute of the product sold in the market
C) The monopolist’s marginal revenue and the tax levied on the sale of the good
D) The monopolist’s marginal costs and the buyers’ willingness to pay for the good
3) Which of the following statements explains why monopolies weaken the functioning of the invisible hand?
A) A monopoly is a price-taker.
B) The quantity produced by a monopoly is too low.
C) Monopolies face an upward sloping demand curve.
D) A monopoly sets the price of its good below marginal costs.
4) When firms charge different prices to different consumers for the same good or service, it is referred to as ________.
A) price bias
B) shadow pricing
C) predatory pricing
D) price discrimination
5) A firm’s objective behind charging different prices to different consumers for the same good is to:
A) enhance goodwill.
B) enhance its profits.
C) enhance social surplus.
D) enhance its market power.
6) Perfect price discrimination occurs when:
A) a firm charges wealthier buyers a lower price.
B) a firm charges each buyer exactly their willingness to pay.
C) a firm charges the same buyer different prices at different points of time.
D) a firm charges different buyers according to the characteristic of their purchase.
7) Perfect price discrimination is also referred to as:
A) first-degree price discrimination.
B) second-degree price discrimination.
C) third-degree price discrimination.
D) fourth-degree price discrimination.
8) Second-degree price discrimination occurs when:
A) each consumer is charged exactly their willingness to pay.
B) different groups of consumers are charged different prices.
C) consumers are charged different prices at different points of time.
D) consumers are charged different prices based on characteristics of their purchase.
9) Buyers who buy in bulk are often offered discounts. This is an example of:
A) predatory pricing.
B) first-degree price discrimination.
C) third-degree price discrimination.
D) second-degree price discrimination.
10) Third-degree price discrimination occurs when:
A) different groups of consumers are charged different prices.
B) consumers are charged different prices at different points of time.
C) consumers are charged different prices according to their willingness to pay.
D) consumers are charged different prices based on the characteristics of their purchases.
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