BU/224 BU224 BU 224 Unit 10 QUIZ

 1.

Question :

Media Cable, a typical utility based monopoly, provides cable service in a rural community. Table 1. shows the demand that Media Cable experiences at each price and Graph 1. depicts Media Cable’s demand curve. Why does such a monopoly face a downward sloping demand curve?

Student Answer:

 More people are going to want to pay the minimum price offered. If they are offering free cable then many people will want to take advantage of that.

 More people are willing to pay for cable as the price of cable service decreases.

 Because the price Media Cable expects to receive for its output will not remain constant as output increases.

 Because fewer people are willing to pay a higher price. More people are willing to pay a lower price but Media Cable is less willing to provide the service at the lower price.

 Because Media Cable is the only producer of cable in this market, so its demand curve is the market demand curve for the entire industry.

Question 2.

Question :

Table 2. Shows Media Cable’s demand table, total revenue, and marginal revenue at each price. Why, at any price lower than $130, is the marginal revenue from an additional sale less than the price?

 

Student Answer:

 Lowering the price means that Media Cable lowers the price on all cable packages sold, and the combination of the price effect and quantity effect work together to reduce the Marginal Revenue.

 Marginal revenue is calculated by dividing the change in quantity into the change in Total Revenue.

 The price effect tends to increase Total Revenue.

 The quantity effect tends to decrease Total Revenue.

 It cost less to provide a service in bulk.

Question 3.

Question :

Table 2. shows Media Cable’s demand table, total revenue, and marginal revenue at each price. What is the price effect of reducing the price from $100 to $80?

Student Answer:

 $4,000

 -$20,000

 $28,000

 -$4,000

 $12,000

Question 4.

Question :

Table 2. shows Media Cable’s demand table, total revenue, and marginal revenue at each price. What is the quantity effect of reducing the price from $100 to $80?

Student Answer:

 $4,000

 -$20,000

 $28,000

 -$4,000

 $12,000

Question 5.

Question :

Table 2. shows Media Cable’s the demand table, total revenue, and marginal revenue at each price. Media Cable’s marginal cost per cable package is $60. What is the profit maximizing quantity and price for Media Cable?

Student Answer:

 90 at $130

 200 at $100

 350 at $80

 600 at $40

 850 at $0

Question 6.

Question :

Dr. Fine and Dr. Feelgood are the only two medical doctors offering immediate walk-in medical services in a small rural town. They operate in a two firm oligopoly. Each doctor can charge either a high price or a low price for a standard medical visit. Figure 1. shows their possible profits, based on each doctor’s pricing strategy. Table 3. shows a particular set of pricing strategies. Which of the following does Table 3. depict?

Student Answer:

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always plays “Tit-for-Tat.”

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always chooses the “Low” price.

 Dr. Feelgood always plays “Tit-for-Tat” and Dr. Fine always chooses the “Low” price.

 Dr. Feelgood always chooses the “Low” price and Dr. Fine always chooses the “Low” price.

 When there is only a single period in which to choose and Dr. Fine does not know what Dr. Feelgood will do, Dr. Fine always chooses the Nash Noncooperative Equilibrium price strategy.

Question 7.

Question :

Examine Figure 1. and Table 4. Which of the following does Table 4. depict?

Student Answer:

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always plays “Tit-for-Tat.”

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always chooses the “Low” price.

 Dr. Feelgood always plays “Tit-for-Tat” and Dr. Fine always chooses the “Low” price.

 Dr. Feelgood always chooses the “Low” price and Dr. Fine always chooses the “Low” price.

 When there is only a single period in which to choose and Dr. Fine does not know what Dr. Feelgood will do, Dr. Fine always chooses the Nash Noncooperative Equilibrium price strategy.

Question 8.

Question :

Examine Figure 1. and Table 5. Which of the following does Table 5. depict? 

Student Answer:

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always plays “Tit-for-Tat.”

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always chooses the “Low” price.

 Dr. Feelgood always plays “Tit-for-Tat” and Dr. Fine always chooses the “Low” price.

 Dr. Feelgood always chooses the “Low” price and Dr. Fine always chooses the “Low” price.

 When there is only a single period in which to choose and Dr. Fine does not know what Dr. Feelgood will do, Dr. Fine always chooses the Nash Noncooperative Equilibrium price strategy.

Question 9.

Question :

Examine Figure 1. and Table 6. Which of the following does Table 6. depict? 

Student Answer:

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always plays “Tit-for-Tat.”

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always chooses the “Low” price.

 Dr. Feelgood always plays “Tit-for-Tat” and Dr. Fine always chooses the “Low” price.

 Dr. Feelgood always chooses the “Low” price and Dr. Fine always chooses the “Low” price.

 When there is only a single period in which to choose and Dr. Fine does not know what Dr. Feelgood will do, Dr. Fine always chooses the Nash Noncooperative Equilibrium price strategy.

Question 10.

Question :

Examine Figure 1., and Tables 7. and 8. Which of the following do these tables depict?

Student Answer:

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always plays “Tit-for-Tat.”

 Dr. Fine always plays “Tit-for-Tat” and Dr. Feelgood always chooses the “Low” price.

 Dr. Feelgood always plays “Tit-for-Tat” and Dr. Fine always chooses the “Low” price.

 Dr. Feelgood always chooses the “Low” price and Dr. Fine always chooses the “Low” price.

 When there is only a single period in which to choose and Dr. Fine does not know what Dr. Feelgood will do, Dr. Fine always chooses the Nash Noncooperative Equilibrium price strategy.