ECON 101 – When a town has a single cable provider

ECON 101 – When a town has a single cable provider

Subject: Economics    / General Economics
Question

1.
When a town has a single cable provider:
a. the cable company usually offers many different cable packages to satisfy customers’ wants.
b. customers must buy some cable channels that they don’t want in order to get the channels that they do want.
c. the government regulates the cable provider’s offerings.
d. the cable provider is a price-taker.
e. the consumers experience no consumer surplus.

2

Beer prices at major league baseball stadiums are usually much higher than prices at a bar or restaurant. This is mainly because:
a. it costs the owners of the baseball teams more money to buy the beer from distributors.
b. demand is much higher at a baseball game than at a bar.
c. baseball team owners have market power and can charge a higher price when they are the only sellers of the beer.
d. the government forces the owner of baseball teams to charge a high price.
e. the owners’ baseball teams are not profit-maximizing.

3

Three natural barriers to entry are:
a. control of resources, economies of scale, and licensing.
b. economies of scale, problems raising capital, and control of resources.
c. problems raising capital, patents and copyright law, and licensing.
d. control of resources, patents and copyright law, and economies of scale.
e. control of resources, economies of scale, and licensing.

4

The demand curve for the product of a firm in a competitive market is _________, and the demand curve for the product of a monopolist is _________.
a. horizontal; downward-sloping
b. horizontal; horizontal
c. downward-sloping; upward-sloping
d. downward-sloping; horizontal
e. upward-sloping; downward-sloping

5

If cable companies were in a highly competitive market, you would expect:
a. cable companies to make profits in the long run.
b. customers to be unhappy about their cable package options.
c. a company to be willing to sell specific channels as well as packaged options.
d. cable companies to force you to choose between buying a little more cable than you really need or going without cable altogether.
e. deadweight loss in the market.

6

For the companies that are able to engage in price discrimination, the practice:
a. is profitable.
b increases the welfare of consumers.
c. is sometimes inefficient for the market.
d. is difficult to maintain over the long run.
e. decreases the welfare of producers.

7

Which of the following examples is the closest to perfect price discrimination?
a. nontransferable goods that are sold in an auction
b. Internet-access package deals for new and old customers
c. monthly versus daily bus tickets
d. daily deals in an electronics store
e. clubs offering waived cover charges for “ladies night”

8
The accompanying table summarizes six potential customers’ willingness to pay for a solo skydiving experience from SkyMasters, Inc. The aircraft has room for eight people, including the pilot and skydiving instructor. The marginal cost of adding each additional passenger is $100. Use this information to answer the questions that follow.

(attached)

Assume that SkyMasters, Inc. follows the profit-maximizing rule and that the company charges a single price for skydiving. Calculate the company’s total revenue.
a. $1,650
b. $1,500
c. $1,000
d. $900
e. $600