Price discrimination is based on observable customer characteristics:
A. when a firm can distinguish consumers with a high versus low willingness to pay.
B. when a firm offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay.
C. when a monopolist knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit.
D. in all cases.
A. when a firm can distinguish consumers with a high versus low willingness to pay.
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Firm A is a monopoly because of network effects, whereas Firm B is a natural monopoly. Which of the following statements is likely to be true in this context?
A) The average total costs of both firms decrease as they increase their output. B) The value of the product that both firms produce increases with an increase in the number of buyers. C) Firm A enjoys a monopoly status because its average total cost decreases with increase in output, whereas Firm B enjoys a monopoly status because the value of its product increases as more consumers buy it. D) Firm B enjoys a monopoly status because its average total cost decreases with increase in output, whereas Firm A enjoys a monopoly status because the value of its product increases as more consumers buy it.
Analysis of adverse selection indicates that financial intermediaries, especially banks
A) have advantages in overcoming the free-rider problem, helping to explain why indirect finance is a more important source of business finance than is direct finance. B) despite their success in overcoming free-rider problems, nevertheless play a minor role in moving funds to corporations. C) provide better-known and larger corporations a higher percentage of their external funds than they do to newer and smaller corporations which rely to a greater extent on the new issues market for funds. D) must buy securities from corporations to diversify the risk that results from holding non-tradable loans.
The key behavioral assumption of the cartel theory is that oligopolists in an industry
A) try to maximize sales instead of profits. B) act as if they are perfect competitors. C) act in a manner consistent with there being only one firm in the industry. D) try to create a demand for their products by way of advertising. E) none of the above
The observation that a 1 percent increase in unemployment tends to lead to a 2 percent decrease in real output is known as
A. A recession. B. Okun's Law. C. A Lucas Wedge. D. Under allocation of resources.