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Scenario 15-4 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area.Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC.Since Black Box has already installed cable to all of the homes in its market area,the marginal cost of delivering PMC to subscribers is zero.The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit.Before setting price,she hires an economist to estimate demand for the PMC service.The economist discovers that there are two types of subscribers who value premium movie channels.First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel.Second,the PMC channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. -Refer to Scenario 15-4.What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?


A) $375,000
B) $400,000
C) $475,000
D) It cannot be determined from the information provided.

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Scenario 15-1 Consider a transportation corporation named C.R.Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest.Currently,there are plenty of seats on the subway,and it is never crowded.Its capacity far exceeds the needs of the city.After just a few years of operation,the shareholders of C.R.Evans experienced incredible rates of return on their investment,due to the profitability of the corporation. -Refer to Scenario 15-1.Which of the following statements are most likely to be true? Scenario 15-1 Consider a transportation corporation named C.R.Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest.Currently,there are plenty of seats on the subway,and it is never crowded.Its capacity far exceeds the needs of the city.After just a few years of operation,the shareholders of C.R.Evans experienced incredible rates of return on their investment,due to the profitability of the corporation. -Refer to Scenario 15-1.Which of the following statements are most likely to be true?   A)  (i) and (ii) only B)  (ii) and (iii) only C)  (i) and (iii) only D)  (i) ,(ii) ,and (iii)


A) (i) and (ii) only
B) (ii) and (iii) only
C) (i) and (iii) only
D) (i) ,(ii) ,and (iii)

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The economic inefficiency of a monopolist can be measured by the


A) number of consumers who are unable to purchase the product because of its high price.
B) excess profit generated by monopoly firms.
C) poor quality of service offered by monopoly firms.
D) deadweight loss.

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The fundamental cause of monopoly is


A) incompetent management in competitive firms.
B) the zero-profit feature of long-run equilibrium in competitive markets.
C) advertising.
D) barriers to entry.

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Scenario 15-2 A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34. -Refer to Scenario 15-2.At Q = 500,the firm's total revenue is


A) $13,000.
B) $15,000.
C) $17,000.
D) $30,000.

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Which of the following statements is true? Which of the following statements is true?   A)  (ii) only B)  (iii) only C)  (i) and (ii) only D)  (ii) and (iii) only


A) (ii) only
B) (iii) only
C) (i) and (ii) only
D) (ii) and (iii) only

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A monopolist produces where P = MC = MR.

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