[Q#3004]

Aisha is willing to spend $40 for a haircut. If she finds a salon where the
price of a haircut is only $15, she will receive ______ in consumer surplus
from this transaction.

$25

[Q#3011]
Aisha is willing to spend $22 for a haircut. If she finds a salon where the
price of a haircut is only $15, she will receive ______ in consumer surplus
from this transaction.

$7

[Q#3008]
Aisha is willing to spend $8 for a haircut. If she finds a salon where the
price of a haircut is only $2, she will receive ______ in consumer surplus
from this transaction.

$6

[Q#3010]
Aisha is willing to spend $16 for a haircut. If she finds a salon where the
price of a haircut is only $12, she will receive ______ in consumer surplus
from this transaction.

$4

[Q#3009]
Aisha is willing to spend $13 for a haircut. If she finds a salon where the
price of a haircut is only $10, she will receive ______ in consumer surplus
from this transaction.
$3

[Q#3020]
Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping
trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is
willing to pay $20. If the actual price of a flashlight turns out to be $17, what
is the total consumer surplus for these three shoppers?

$3

Adie wants to take some online classes this semester. She is willing to pay
$1,000 for the first class, $800 for the second, $700 for the third, and $500
for the fourth. If online classes cost $750, Adie will take ________ online
classes and her consumer surplus will equal ________.

2; $300

Jeanette is willing to pay $100 for the first pair of shoes, $80 for the second
pair, $50 for the third, and $30 for the fourth. If shoes cost $50, Jeanette will
buy ________ pairs of shoes and her total consumer surplus equals
________.

3; $80

[Q#3019]
Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping
trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is
willing to pay $20. If the actual price of a flashlight turns out to be $9, what
is the total consumer surplus for these three shoppers?

$12
[Q#3016]
Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping
trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is
willing to pay $20. If the actual price of a flashlight turns out to be $8, what
is the total consumer surplus for these three shoppers?

$14

[Q#3018]
Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping
trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is
willing to pay $20. If the actual price of a flashlight turns out to be $13, what
is the total consumer surplus for these three shoppers?

$7

[Q#3014]
Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping
trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is
willing to pay $20. If the actual price of a flashlight turns out to be $15, what
is the total consumer surplus for these three shoppers?

$5

[Q#3013]
Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping
trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is
willing to pay $20. If the actual price of a flashlight turns out to be $10, what
is the total consumer surplus for these three shoppers?

$10
The diagram above shows the effect of a tax in the market
for good X. Assume the following are the values for the
prices and quantities identified in the diagram:
P4 = 836
P3 = 698
P2 = 457
P1 = 119
QA = 115
QB = 340

What is the Government Revenue (GR) from the tax?

GR = (Qa)*(P3-P1) = 66585

The diagram above shows the effect of a tax in the market

for good X. Assume the following are the values for the
prices and quantities identified in the diagram:
P4 = 847
P3 = 677
P2 = 447
P1 = 196
QA = 153
QB = 387

What is the Deadweight Loss (DWL) resulting from this

tax?

DWL = (.5)*(Qb-Qa)*(P3-P1)=56277

The diagram above shows the effect of a tax in the market

for good X. Assume the following are the values for the
prices and quantities identified in the diagram:
P4 = 889
P3 = 673
P2 = 439
P1 = 106
QA = 129
QB = 375

What is the value of Consumer Surplus (CS) wheh the

market has a tax?

CS tax = (.5)*(P4-P3)*(Qa) = 13932

[Q#3036]
Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns
for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going
rate for lawn mowing is $21, what is the total producer surplus received by
the three of them?

$12

[Q#3034]
Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns
for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going
rate for lawn mowing is $24, what is the total producer surplus received by
the three of them?

$18

[Q#3032]
Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns
for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going
rate for lawn mowing is $23, what is the total producer surplus received by
the three of them?

$16

[Q#3033]
Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns
for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going
rate for lawn mowing is $12, what is the total producer surplus received by
the 3 of them?

$2
Mountain River Adventures offers whitewater rafting trips down the
Colorado River. It costs the firm $100 for the first raft trip per day, $120 for
the second, $140 for the third, and $160 for the fourth. If the market price
for a raft trip is $150, Mountain River Adventures will offer ________ trips
per day and will have producer surplus equal to ________.

3; $90

[Q#3037]
Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns
for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going
rate for lawn mowing is $26, what is the total producer surplus received by
the 3 of them?

$22

[Q#3029]
Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns
for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going
rate for lawn mowing is $15, what is the total producer surplus received by
the 3 of them?

$5

[Q#3044]
Milk is an input in the production of cheese, and cheese and bagels are
complements. A decrease in the price of milk will _________ the producer
surplus in the market for bagels.

Increase
[Q#3042]
Milk is an input in the production of cheese, and cheese and humus are
substitutes. An increase in the price of milk will _________ the producer
surplus in the market for humus.

Increase

[Q#3049]
Oil is an input in the production of gasoline, and gasoline and cars are
complements. An increase in the price of oil will _________ the producer
surplus in the market for cars.

Decrease

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Peanut butter is an inferior good. If there is an increase in income, total
surplus in the peanut butter market:

will decrease

[Q#3053]
Tomatoes are an input in the production of ketchup, and ketchup and
mustard are substitutes. A decrease in the price of tomatoes will
_________ the total surplus in the market for mustard.

Decrease

[Q#3048]
Oil is an input in the production of gasoline, and gasoline and cars are
complements. A decrease in the price of oil will _________ the producer
surplus in the market for cars.
Increase

If a monopolist knows its price elasticity of demand is less than one, then
a(n):

increase in price will increase total revenue.

If a monopolist knows its price elasticity of demand is greater than one,

then a(n):

decrease in price will increase total revenue.

If a monopolist knows its price elasticity of demand is elastic, then a(n):

decrease in price will increase total revenue.

If a monopolist knows its price elasticity of demand is Inelastic, then a(n):

increase in price will increase total revenue.

Compared to a perfectly competitive industry, a monopolist:

charges a higher price.

Suppose a perfectly competitive market is suddenly transformed into one

that operates as a monopoly market. We would expect:

price to rise, output to fall, consumer surplus to fall, producer surplus to

rise, and deadweight loss to rise
Suppose GoSports pennant monopoly is broken up and the pennant
industry becomes perfectly competitive. We would expect the ________ to
increase from the breakup and ________ to decrease from the breakup.

consumer surplus and total surplus; producer surplus

One of the major differences between a monopolist and a purely

competitive firm is that the monopolist has a ________ demand curve,
while the purely competitive firm has a ________ demand curve.

downward-sloping; perfectly elastic

Compared to a perfectly competitive market, a monopolist will produce

________ and charge a ________ price.

less; higher

The demand curve for a monopoly is:

above the MR curve.

The demand curve facing a monopolist is:

downward sloping, like the industry demand curve in perfect competition

The demand curve for a monopoly is:

above the marginal revenue curve

The demand curve facing a monopolist is always:

the same as the industry's demand curve

If a monopolist is producing a quantity that generates MC > MR, then profit:

can be increased by decreasing production.

If a monopolist is producing a quantity that generates MC > MR, then profit:

can be increased by increasing price

If a monopolist is producing a quantity that generates MC < MR, then profit:

can be increased by increasing production

If a monopolist is producing a quantity that generates MC = MR, then profit:

is maximized.

If a monopolist is producing a quantity that generates MC = P, then profit:

can be increased by decreasing production.

Scenario 10.3:
The demand curve and marginal revenue curve for red herrings are given
as follows:
Q = 250 - 5P
MR = 50 - 0.4Q

Refer to Scenario 10.3. What level of output maximizes revenue?

125 (MR = 0)
Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve,
total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5

Refer to Scenario 10.2. Suppose that a tax of $5 for each unit produced is
imposed by state government. What is the profit maximizing level of output?

90

Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve,
total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5

Refer to Scenario 10.2. What is the profit maximizing level of output?

95
Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve,
total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5

Refer to Scenario 10.2. A business license is required to stay in business.

The license costs $1000. What is the profit maximizing level of output?

95

Scenario 10.7:
The marginal revenue of green ink pads is given as follows:
MR = 2500 - 5Q
The marginal cost of green ink pads is 5Q.

Refer to Scenario 10.7. Suppose that the firm chooses to produce 200 ink
pads. At this level of output the demand for ink pads is

elastic.

Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve,
total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5

Refer to Scenario 10.2. Suppose that in addition to the tax, a business

license is required to stay in business. The license costs $1000. What
happens to profit?
It decreases by less than $1000.

Scenario 10.8:
Adriana is a monopolist producing green calculators. The average and
marginal cost curves and average and marginal revenue curves for her
product are given as follows:
AC = Q + (10,000/Q) MC = 2Q AR = 30 - (Q/2) MR = 30 - Q

Refer to Scenario 10.8. Suppose that the regulatory agency sets your price
where average revenue equals average cost. How much profit will Adriana
make?

She will break even

Scenario 10.3:
The demand curve and marginal revenue curve for red herrings are given
as follows:
Q = 250 - 5P
MR = 50 - 0.4Q

Refer to Scenario 10.3. At the profit-maximizing level of output, demand is

elastic, but not infinitely elastic.

Scenario 10.1:
Barbara is a producer in a monopoly industry. Her demand curve, total
revenue curve, marginal revenue curve and total cost curve are given as
follows:
Q = 160 - 4P TR = 40Q - 0.25Q2 MR = 40 - 0.5Q TC = 4Q MC = 4
Refer to Scenario 10.1. How much profit will she make?

1,296

Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve,
total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5

Refer to Scenario 10.2. Suppose that a tax of $5 for each unit produced is
imposed by state government. How much profit does the monopolist earn?

$4050

Scenario 10.7:
The marginal revenue of green ink pads is given as follows:
MR = 2500 - 5Q
The marginal cost of green ink pads is 5Q.

Refer to Scenario 10.7. How many ink pads will be produced to maximize
profit?

250

Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve,
total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5

Refer to Scenario 10.2. How much profit does the monopolist earn?

$4512.50

Scenario 10.9:
Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The
demand curve, marginal revenue and marginal cost curve for macadamia
nuts are given as follows:
P = 360 - 4Q MR = 360 - 8Q MC = 4Q

Refer to Scenario 10.9. At the profit maximizing level of output, what is the
level of producer surplus?

5,400

Scenario 10.8:
Adriana is a monopolist producing green calculators. The average and
marginal cost curves and average and marginal revenue curves for her
product are given as follows:
AC = Q + (10,000/Q) MC = 2Q AR = 30 - (Q/2) MR = 30 - Q

Refer to Scenario 10.8. The deadweight loss from monopoly is ________.

5

Scenario 10.9:
Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The
demand curve, marginal revenue and marginal cost curve for macadamia
nuts are given as follows:
P = 360 - 4Q MR = 360 - 8Q MC = 4Q

Refer to Scenario 10.9. At the profit maximizing level of output, what is the
level of consumer surplus?

1,800

The marginal cost of a monopolist is constant and is $10. The demand

curve and marginal revenue curves are given as follows:
demand: Q = 100 - P
marginal revenue: MR = 100 - 2Q

The deadweight loss from monopoly power is ________.

$1012.50

You produce stereo components for sale in two markets, foreign and
domestic, and the two groups of consumers cannot trade with one another.
If your firm practices third-degree price discrimination to maximize profits,
the marginal revenue

all of the above

Because tourist demand for airline flights is relatively ________, small
________ in ticket price will result in relatively ________ in additional
tourists.

elastic; reductions; large increases

You produce stereo components for sale in two markets, foreign and
domestic, and the two groups of consumers cannot trade with one another.
You will charge the higher price in the market with the

lower own price elasticity of demand (more inelastic demand).

Suppose a monopoly can separate its customers into two groups. If the
monopoly practices price discrimination, it will charge the lower price to the
group with:

the higher price elasticity of demand.

If there are open first-class seats available on a particular flight, some

airlines allow customers with coach (discount) tickets to upgrade to first-
class tickets during the electronic check-in process. Which of the following
statements must be true for the airline to justify this practice?

MR must be the same for both full-fare and upgrade customers.

The city bus system charges lower fares to senior citizens than to other
passengers. Assuming that this pricing strategy increases the profits of the
bus system, we can conclude that senior citizens must have a ________ for
bus service than other passengers.

more elastic demand

A firm sells an identical product to two groups of consumers, A and B. The
firm has decided that third-degree price discrimination is feasible and
wishes to set prices that maximize profits. Which of the following best
describes the price and output strategy that will maximize profits?

MRA = MRB = MC.

Amtrak charges lower fares to students than to its other passengers. This
pricing strategy increases Amtrak's profits. From this information, we can
conclude that students must have a ________ for Amtrak train service than
other passengers.

more price-elastic demand

Because business travelers' demand for airline flights is relatively

________, small increases in price will result in relatively ________ in
additional business travelers.

price-inelastic; small decreases

Johnny's Shop-and-Pay is a regional grocery chain, and their marketing

manager is trying to determine the profit-maximizing coupon program for
the store's laundry detergent brand. Coupon users at the store have an
elasticity of demand for this product that equals -3, and the elasticity of
demand for non-users of the coupon for the store brand equals -1.5. If the
full retail (undiscounted) price of the detergent is $10 per box, what is the
optimal discount to provide for coupon users?

50% off

If there are open first-class seats available on a particular flight, some

airlines allow customers with coach (discount) tickets to upgrade to first-
class tickets during the electronic check-in process. Which of the following
statements must be true for the airline to justify this practice?

MR must be the same for both full-fare and upgrade customers.

A Japanese steel firm sells steel in the United States and in Japan. Since
the United States buys steel from a number of sources, the U.S. demand
for Japanese steel is more price-elastic than the Japanese demand for
Japanese steel. If the Japanese steel firm wishes to maximize its profits, it
should:

charge a lower price in the United States and a higher price in Japan.

In order to maximize profits, an airline will offer ________ prices to

customers with ________ demand.

higher; inelastic

Suppose a monopoly can separate its customers into two groups. If the
monopoly practices price discrimination, it will charge the lower price to the
group with:

the higher price elasticity of demand.

A local community college charges lower tuition fees to local town residents
than to nonresidents. This pricing strategy increases the profits of the
community college. Using this information, we can conclude that
nonresidents must have a ________ for attending the community college
than residents.

less price-elastic demand

Suppose the price elasticity of demand for coffee at the CoffeeBarn equals
1.71 for women and 0.55 for men. A successful price discrimination
strategy would lead to:

higher prices for men and lower prices for women as long as the
CoffeeBarn could prevent women from reselling drinks to men.

MNO Limited publishes a magazine targeted at urban professionals who

live on the east and west coasts of the U.S., and all of the magazines are
printed at a marginal cost of $0.50 per copy at a publishing plant in Kansas.
If the East Coast elasticity of demand for the magazine is -1.25 and the
West Coast elasticity of demand is -1.50, what prices should MNO Limited
charge for the magazines in these two markets in order to maximize
profits?

Price should be $1.50 on the West Coast and $2.50 on the East Coast

Louey's Greasy Spoon restaurant charges $15 for each dinner entree and
$5 for each dessert selection, and they offer a dinner special that provide
an entree and dessert for $18. If a diner at Louey's assigns zero value to
dessert and $19 to an entree, what is their optimal decision?

Buy only the entre

A third-degree price discriminating monopolist can sell its output either in

the local market or on an internet auction site (or both). After selling all of its
output, the firm discovers that the marginal revenue earned in the local
market was $20 while its marginal revenue on the internet auction site was
$30. To maximize profits the firm should
have sold less output in the local market and more on the internet auction
site.

Which of the following is not an example of price discrimination?

Street vendors increase the price of umbrellas when it is raining.

Which of the following is not an example of price discrimination?

a special Fourth of July sale

A doctor charges two different prices for medical services, and the price
level depends on the patients' income such that wealthy patients are
charged more than poorer ones. This pricing scheme represents a form of

third-degree price discrimination

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

second-degree price discrimination.

A tennis pro charges $15 per hour for tennis lessons for children and $30
per hour for tennis lessons for adults. The tennis pro is practicing

third-degree price discrimination.

A firm is charging a different price for each unit purchased by a consumer.

This is called

first-degree price discrimination.

Suppose that the demand equations of women and men
for admission to Los Angeles Dodger baseball games are
given by:

Pw = 6 (1/8,000)Qw
Pm = 10 (1/8,000)Qm

respectively. Moreover, suppose that the total seating

capacity of Dodger Stadium is fixed at 56,000. If the ball
club elects to practice third-degree price discrimination
and would like to fill the stadium, what prices should men
and women be charged for a ticket?
Assume that there are 100 customers in the market for
Vanity Wagons (VWs), each with the demand curve q = 10
P/2, where P is the price of VWs, and q is the quantity of
VWs demanded by the consumer per day.

a) Assume that the VW market is a monopoly and that the

average variable cost of producing VWs is constant at $10.
What is the monopolists profit maximizing output of VWs?
Qm =
Answer
250
The correct answer is: 250

_ Remember that when demand is: P = a - bQ; MR = a -

2bQ

b) What is the loss to society as a result of the VW market

being a monopoly?

DWL = $
Answer
625
The diagram above shows the Monopoly market for good
X. Assume the following are the values for the prices and
quantities identified in the diagram:
P4 = 872
P3 = 602
P2 = 411
P1 = 156
QA = 112
QB = 307
Suppose you own a firm that produces widgets and is a
monopoly. The market demand is given by the equation P
= 290 3Q, where P is the price of gadgets and Q is the
quantity of gadgets sold per week. The firms total cost
function is given by the equation. TC = 1259 + 6Q2

What is the profit-maximizing level of output for this firm?

16

Notice that MC = 2(6)Q, and MR = 290 - 2(3)Q