ECON 1000 - Chapter 9 Pricing For Profits, Marginal Revenue and Marginal Cost

C) decreases marginal revenues.

For a one-price price maker, lowering the price always
A) increases marginal costs.
B) increases total revenues.
C) decreases marginal revenues.
D) increases marginal revenues.
E) decreases total revenues.

D) increases marginal revenues.

For a one-price price maker, raising the price always
A) decreases marginal revenues.
B) decreases total revenues.
C) increases total revenues.
D) increases marginal revenues.
E) decreases marginal costs.

D) less than price.

For a one-price price maker, marginal revenue is always
A) more than total revenue.
B) equal to price.
C) equal to total revenue.
D) less than price.
E) more than price.

A) haircuts.

It is easiest to have more than one price for
A) haircuts.
B) gasoline.
C) cigarettes.
D) t-shirts.
E) hamburgers.

D) bottles of beer.

It is difficult to have more than one price for
A) tuition.
B) airline tickets.
C) theatre tickets.
D) bottles of beer.
E) used cars.

E) sales revenue

Marginal revenue is the additional ________ when a business increases output.
A) marginal cost
B) buyers gained
C) labour required
D) profits earned
E) sales revenue

E) marginal cost.

It is a smart business choice to increase output as long as marginal revenue is more than
A) zero.
B) sunk cost.
C) average cost.
D) price.
E) marginal cost.

D) demand is elastic.

Lowering the price causes total revenue to increase if
A) price is above zero.
B) supply is elastic.
C) demand is inelastic.
D) demand is elastic.
E) supply is inelastic.

E) total revenues gained from the 3rd and 4th seats.

The marginal revenue from selling the 4th seat on an airplane is the difference between the
A) costs for the 3rd and 4th seats.
B) price charged for the 3rd and 4th seats.
C) price charged for the 4th and 5th seats.
D) total revenues gained from the 4th and 5th seats.
E) total revenues gained from the 3rd and 4th seats.

C) $0.

At a price of $50, Gina sold 4 kisses at her charity fundraiser last week. Last night, she dropped her price to $40 and sold 5 kisses. Gina's marginal revenues are
A) $200.
B) $50.
C) $0.
D) $40.
E) $10.

C) $400.

At a price of $1,000 a night, a rock bank named Ian and The Animals used to get hired twice a week. They dropped their price to $800 a night and now they play three nights a week. The band's marginal revenues for a week are
A) $800.
B) $600.
C) $400.
D) $1,000.
E) $200.

A) $300.

At a price of $500 an evening, Dave the Driver provides escort services to rich older women. He currently has 3 clients. He dropped his price to $450 a night and now has 4 clients. George's marginal revenues from the 4th client are
A) $300.
B) $450.
C) $150.
D) $500.
E) $50.

A) $60.

At a price of $100 a room, The No-Tell Motel had 3 rooms rented. When they dropped their price to $90, they rented 4 rooms. The marginal revenue for the 4th room is
A) $60.
B) $10.
C) $100.
D) $90.
E) $300.

D) - $1

In order to increase sales from 7 units to 8 units, a one-price oligopolist must lower the price from $7 per unit to $6. What is the marginal revenue in this range?
A) $48
B) $6
C) $1
D) - $1
E) none of the above

D) $4.

If a business can sell 10 units of output at a price of $15, or 11 units of output at a price of $14, the marginal revenue from selling the 11th unit is
A) $154.
B) $15.
C) $14.
D) $4.
E) $1.

D) "I don't really keep close track of total profits, but I don't approve any business deal unless it

Four price-makers were overheard talking at an expensive restaurant. Which of their statements below is a correct recipe for maximum profits?
A) "In my company, we don't increase output unless we know that the larger output will raise
total revenue."
B) "I think cost minimization is the key to maximum profits."
C) "We try to make the most of our equipment by producing at maximum capacity."
D) "I don't really keep close track of total profits, but I don't approve any business deal unless it
increases my revenue more than it increases my costs."
E) None of the above.

B) when cutting prices, both have marginal revenues less than price.

A business in monopolistic competition is like a monopoly because
A) both face perfectly elastic demand.
B) when cutting prices, both have marginal revenues less than price.
C) both are protected by high barriers to entry.
D) neither is protected by high barriers to entry.
E) both have economies of scale.

D) is all of the above.

The marginal revenue curve for a price-taking business in perfect competition
A) is a horizontal line.
B) is the same as the business's demand curve.
C) intercepts the vertical axis at the market price of the product.
D) is all of the above.
E) is none of the above.

E) is none of the above.

The marginal revenue curve for a price-making business
A) is a horizontal line.
B) is the same as the business's demand curve.
C) intercepts the vertical axis at the market price of the product.
D) is all of the above.
E) is none of the above.

C) intercepts the vertical axis at the market price of the product.

The marginal revenue curve for a price-taking business
A) is downward sloping.
B) is the same as the business's demand curve.
C) intercepts the vertical axis at the market price of the product.
D) is more steeply sloped than the business's demand curve.
E) intercepts the vertical axis at the same price as the business's demand curve.

B) is the same as the business's demand curve.

The marginal revenue curve for a price-taking business
A) is downward sloping.
B) is the same as the business's demand curve.
C) is the same as the market demand curve for all businesses in the industry.
D) is more steeply sloped
E) is upward sloping.

E) intercepts the vertical axis at the same price as the business's demand curve.

The marginal revenue curve for a price-making business
A) is horizontal.
B) is the same as the business's demand curve.
C) intercepts the vertical axis at the market price of the product.
D) is the same as the market demand curve for all businesses in the industry.
E) intercepts the vertical axis at the same price as the business's demand curve.

E) is more steeply sloped than the business's demand curve.

The marginal revenue curve for a price-making business
A) is horizontal.
B) is the same as the business's demand curve.
C) intercepts the vertical axis at the market price of the product.
D) is the same as the market demand curve for all businesses in the industry.
E) is more steeply sloped than the business's demand curve.

E) $1,600.

At a price of $1,000 a night, a rock bank named Ian and The Animals used to get hired twice a week. Their total costs were $2,000 a week. They dropped their price to $800 a night and now play three nights a week. Their total costs increased to $3,600 a week. The band's marginal costs for playing a 3rd night are
A) $1,000.
B) $200.
C) $1,200.
D) $3,600.
E) $1,600.

E) $800.

Before dropping his price, Dave the Driver was driving 3 women a week. Dave had total costs of $1,200 a week. When he took on a 4th client, his total costs increased to $2,000 a week. Dave's marginal costs of increasing his output are
A) $300.
B) $2,000.
C) $500.
D) $1,200.
E) $800.

C) $90.

Before dropping room prices from $100 to $90, the No-Tell Motel rented 3 rooms. Total costs were $150. After the price drop, total costs increased to $240. The motel's marginal costs of increasing output are
A) $50.
B) $240.
C) $90.
D) $60.
E) $150.

A) 1 and 3

Businesses operating near capacity have

1 increasing marginal costs
2 constant marginal costs
3 upward sloping marginal cost curves
4 horizontal marginal costs curves

A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) none of the above

D) 2 and 4

Businesses not operating near capacity have

1 increasing marginal costs
2 constant marginal costs
3 upward sloping marginal cost curves
4 horizontal marginal costs curves

A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) none of the above

A) productivity decreases, and marginal costs increase.

A business has diminishing returns when output increases,
A) productivity decreases, and marginal costs increase.
B) productivity increases, and marginal costs decrease.
C) productivity increases, and marginal costs increase.
D) productivity decreases, and marginal costs decrease.
E) and fewer bottles are returned to the Beer Store.

E) all of the above.

Increasing marginal costs can come from
A) diminishing returns.
B) businesses operating near capacity.
C) inputs that are not equally productive in all activities.
D) paying overtime wages to employees.
E) all of the above.

B) incremental costs.

Marginal costs are also called
A) total costs.
B) incremental costs.
C) fixed costs.
D) sunk costs.
E) average costs.

B) $110

A business's fixed costs are $100. If total costs are $200 for one unit of output and $310 for two units, what is the marginal cost of the second unit?
A) $100
B) $110
C) $200
D) $210
E) $310

C) $120

A business's fixed costs are $100. If total costs are $210 for one unit of output and $330 for two units, what is the marginal cost of the second unit?
A) $130
B) $110
C) $120
D) $210
E) $330

E) marginal revenues exceed marginal costs.

To maximize profits, a price maker must choose outputs where
A) marginal costs exceed marginal revenues.
B) price is less than marginal revenue.
C) price is less than marginal cost.
D) price exceeds average revenues.
E) marginal revenues exceed marginal costs.

A) fixed costs don't matter.

When choosing the profit-maximizing quantity of output, a price maker must realize that
A) fixed costs don't matter.
B) no costs are important.
C) variable costs don't matter.
D) fixed costs are important.
E) marginal costs don't matter.

D) pick the highest price customers will pay.

When choosing the profit-maximizing price, a price maker must
A) set price equal to marginal costs.
B) set price a few pennies below the competition.
C) set price equal to average variable cost.
D) pick the highest price customers will pay.
E) choose the same price as other businesses.

B) marginal revenue exceeds marginal cost.

A signal to increase output occurs when
A) marginal cost exceeds price.
B) marginal revenue exceeds marginal cost.
C) marginal revenue exceeds price.
D) average variable cost exceeds price.
E) marginal cost exceeds marginal revenue.

C) marginal cost exceeds marginal revenue.

A signal to decrease output occurs when
A) average variable cost exceeds price.
B) marginal revenue exceeds price.
C) marginal cost exceeds marginal revenue.
D) marginal cost exceeds price.
E) marginal revenue exceeds marginal cost.

E) total revenue minus total costs.

Profits equal
A) marginal revenue plus marginal costs.
B) total costs minus total revenue.
C) marginal revenue minus marginal costs.
D) total revenue minus fixed costs.
E) total revenue minus total costs.

C) she sells everything she produces.

If a price maker choose her price properly,
A) the output quantity is efficient.
B) the output quantity is equitable.
C) she sells everything she produces.
D) profits are zero.
E) her customers will thank her.

B) marginal revenue is less than marginal cost.

If a price maker sets her price too low,
A) profits are maximized.
B) marginal revenue is less than marginal cost.
C) fixed costs are zero.
D) other businesses enter the industry.
E) marginal revenue equals marginal cost.

E) marginal revenue is greater than marginal cost.

If a price maker sets her price too high,
A) other businesses exit the industry.
B) fixed costs are zero.
C) price exceeds average revenue.
D) profits are maximized.
E) marginal revenue is greater than marginal cost.

C) maximum profits from producing all quantities where marginal revenue is greater than marginal cost

Which of the following is true for businesses in perfect competition, monopolistic competition, and for single-price pure monopoly?
A) many substitute products available
B) zero economic profits in the long run
C) maximum profits from producing all quantities where marginal revenue is greater than marginal cost
D) barriers to entry
E) inelastic demand

B) 600 units and charging a price of $4.

A price-making business must follow the one-price rule and faces the following demand schedule: at prices of $7, $6, $5, $4, and $3, quantity demanded is 300, 400, 500, 600, and 700 units respectively. If the business's marginal cost is constant at $150, it maximizes profits by producing
A) 700 units and charging a price of $3.
B) 600 units and charging a price of $4.
C) 500 units and charging a price of $5.
D) 400 units and charging a price of $6.
E) 300 units and charging a price of $7.

D) 400 units and charging a price of $6.

A price-making business must follow the one-price rule and faces the following demand schedule: at prices of $7, $6, $5, $4, and $3, quantity demanded is 300, 400, 500, 600, and 700 units respectively. If the business's marginal cost is constant at $250, it maximizes profits by producing
A) 700 units and charging a price of $3.
B) 600 units and charging a price of $4.
C) 500 units and charging a price of $5.
D) 400 units and charging a price of $6.
E) 300 units and charging a price of $7.

C) 500 units and charging a price of $5.

A price-making business must follow the one-price rule and faces the following demand schedule: at prices of $7, $6, $5, $4, and $3, quantity demanded is 300, 400, 500, 600, and 700 units respectively. If the business's marginal cost is constant at $50, it maximizes profits by producing
A) 700 units and charging a price of $3.
B) 600 units and charging a price of $4.
C) 500 units and charging a price of $5.
D) 400 units and charging a price of $6.
E) 300 units and charging a price of $7.

D) revenues will increase

What will happen if the Rogers Centre, where the Blue Jays play baseball, introduces
discounts for seniors and students?
A) fewer seniors will attend
B) the Blue Jays will win a few more games
C) the cost of providing a seat will increase
D) revenues will increase
E) fewer students will attend

D) the service is not the same for men and women.

A hair stylist who charges female clients a higher price than male clients is not a price discriminator because
A) low-priced male haircuts can be re-sold to female customers.
B) female customers do not need to have their hair cut as often.
C) male customers have fewer substitutes.
D) the service is not the same for men and women.
E) men need haircuts more often than women.

A) revenues increase.

When a movie theatre starts price discriminating,
A) revenues increase.
B) the cost of operating the theatre increases.
C) it sells more full-price tickets.
D) the cost of operating the theater decreases.
E) revenues decrease.

A) revenues increase.

When a bus company starts using price discrimination,
A) revenues increase.
B) the cost of operating a bus decreases.
C) revenues decrease.
D) the cost of operating a bus increase.
E) it sells more full-price bus tickets.

C) more seniors would ride the bus

If a local transit authority stopped price discrimination, which would most likely not occur?
A) profits would fall
B) revenues would decrease
C) more seniors would ride the bus
D) fewer seniors would ride the bus
E) fewer children would ride the bus

E) are least price sensitive

With price discrimination, customers who ________ pay the highest price.
A) are the most able to substitute
B) don't really need this product or service
C) are least willing to pay
D) are most price sensitive
E) are least price sensitive

A) charging seniors a lower price for bus tickets

Which is an example of price discrimination?
A) charging seniors a lower price for bus tickets
B) charging extra for home delivery
C) lowering the price on fruits and vegetables that are about to go bad
D) charging men and women different prices for haircuts
E) charging a lower price for upper deck seats at the ball park

D) raising the price to customers with inelastic demand.

Price discrimination means
A) raising the price to customers with elastic demand.
B) lowering the price to all customers.
C) charging everyone the same price.
D) raising the price to customers with inelastic demand.
E) raising the price to all customers.

B) lowering the price to customers with elastic demand.

Price discrimination means
A) charging everyone the same price.
B) lowering the price to customers with elastic demand.
C) lowering the price to customers with inelastic demand.
D) raising the price to all customers.
E) raising the price to customers with elastic demand.

B) people who shop at Shopper's Drug Mart are more price sensitive than typical Blue Bombers' fans.

The Winnipeg Blue Bombers Football Club offers discounted tickets through Shopper's Drug Mart. An economist says this is price discrimination because
A) this decreases the number of people who go to the game.
B) people who shop at Shopper's Drug Mart are more price sensitive than typical Blue Bombers' fans.
C) this increases the cost of operating the new stadium where the Blue Bombers play their games.
D) people who shop at Shopper's Drug Mart are less price sensitive than typical Blue Bombers' fans.
E) this is efficient.

A) letting high-school students buy bus tickets more cheaply because they have no alternative means of transportation

Which idea is not consistent with price discrimination?
A) letting high-school students buy bus tickets more cheaply because they have no alternative means of transportation
B) discounting summer clothes in August because most customers are more price sensitive when they know they are buying for next summer
C) selling newspapers and magazines at a lower price because a subscriber is more price sensitive
D) over-charging tourists in Toronto because most people are less price sensitive when they are on vacation
E) charging students in professional programs a higher tuition fee because they are less price sensitive

E) resentment; higher

When a business has more than one price it must avoid ________ among people who are paying the ________ price.
A) resentment; lower
B) deregulation; lower
C) deregulation; higher
D) jealousy; higher
E) resentment; higher

A) prevent consumer resale.

A successful price-discriminating business must be able to
A) prevent consumer resale.
B) differentiate consumers with elastic demand and charge them higher prices.
C) differentiate consumers with inelastic demand and charge them lower prices.
D) do all of the above.
E) do none of the above.

D) do all of the above.

A successful price-discriminating business must be able to
A) prevent consumer resale.
B) differentiate consumers with elastic demand and charge them lower prices.
C) differentiate consumers with inelastic demand and charge them higher prices.
D) do all of the above.
E) do none of the above.

A) prevent consumer resale.

A successful price-discriminating business must be able to
A) prevent consumer resale.
B) differentiate consumers with lower willingness to pay and charge them higher prices.
C) differentiate consumers with higher willingness to pay and charge them lower prices.
D) do all of the above.
E) do none of the above.

D) do all of the above.

A successful price-discriminating business must be able to
A) prevent consumer resale.
B) differentiate consumers with lower willingness to pay and charge them lower prices.
C) differentiate consumers with higher willingness to pay and charge them higher prices.
D) do all of the above.
E) do none of the above.

C) identifies consumer groups with different price elasticities of demand.

Price discrimination is only profitable if a business
A) is a monopoly.
B) creates high barriers to entry.
C) identifies consumer groups with different price elasticities of demand.
D) identifies consumer groups with different cross elasticities of demand.
E) identifies consumer groups with different income elasticities of demand.

E) is efficient

When businesses maximize their profits, the outcome is
A) always efficient.
B) always inefficient.
C) best for the economy as a whole.
D) is inefficient for price-taking market structures and efficient for price-making market
structures.
E) is efficient

A) restricts output, raises price, and earns higher profits.

Compared to a perfectly competitive industry, an industry with price-making power
A) restricts output, raises price, and earns higher profits.
B) increases output, raises price, and earns higher profits.
C) restricts output, raises price, and earns normal profits.
D) increases output, raises price, and earns normal profits.
E) restricts output, raises price, and is more efficient.

C) maximum total surplus.

Industries with perfect competition have
A) product variety.
B) the benefits of creative destruction.
C) maximum total surplus.
D) deadweight loss.
E) none of the above.

E) all of the above.

Industries with price-making power have
A) product variety.
B) the benefits of creative destruction.
C) economic profits.
D) deadweight loss.
E) all of the above.