Use the followining to usur Figure: PPV Price, Costs, $100 Marginal 0 Revenue g0
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Use the followining to usur Figure: PPV Price, Costs, $100 Marginal 0 Revenue g0 70 60 50 40 30 20 10 MR 0 123456789 Quantity (number of subscrlptions) 29. (Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football gatne on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, consumer surplus will be: A) S180. B) $100. C) $40. D) So 30. Which of the following stenarios best describes an oligopolistic industry? A) A single cable company serves customers in a small town. B) Thousands of soybean farmers sell their output in a global commodities market. C) Coca-Cola and Pepsi sell most of the soft drinks consumed around the world. D) A college has one bookstore selling textbooks to students 31. If an industry initially has an HHI of 1,250, a merger between two of the largest (in terms of market share) firms in the industry: A) would be allowed to occur, since it would increase the competitive nature of the industry would not likely be allowed, since it most likely would reduce the competitive nature of the industry B) C) would be allowed, since this HHl represents a strongly competitive industry D) is likely to be allowed, since it moves the industry toward a socially optimal level of output. 32. The breakup of Microsoft in 2005 was one of the first applications of antitrust policy in the United States. A) True B) False Page 9Explanation / Answer
29. Answer D. Under the case of perfect price discrimination, the consumer pays according to his maximum willingness to pay as in this case firm charges different prices from different consumers. Therefore, the consumer surplus in this case is 0.
30. Answer C.Oligopoly industry is where only a few firms dominate the market. The best example in this case is - C, that is Coca Cola and Pepsi sell most of the soft drinks sold in the world.
31. Answer B. HHI index is used to calculate the size of the firm relative to the size of the industry ranging from 0 to 10,000 with 10,000 depicting monopoly firm. Since in this case HHI is not large enough, the merger between the two large firms is not suggested.
32. Answer B. False, The breakup of Microsoft was not the anti trust policy of United States
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