Quiz 9 Version A

(1)d (2)d. (3)c. (4)d. (5)b. (6)c. (7)b. (8)a. (9)a. (10)a.

Quiz 9 Version B

(1)a. (2)f. (3)d. (4)e. (5)a. (6)c. (7)d. (8)b. (9)b. (10)d.

Test 9 Version A

(1) [Cases: 10 pts]

1. Standard Oil v. U.S. (1911).
2. U.S. v. U.S. Steel (1920).
3. MCI v. AT&T (1982).
4. Utah Pie v. Continental Baking (1967).
5. Berkey Photo v. Kodak (1979).

(2) [Predatory pricing: 33 pts]

1. $8.
2. $360.
3. $10.
4. $640.
5. $500.
6. No, because the start-up costs are greater than the expected profit in Town B.
7. $80.
8. 60. This quantity gives Discount Drug zero profit in Town A, but deters Value Drug from entering Town B.
9. 60, because Discount Drug will then be a monopoly in Town B. Profit-maximizing quantity is found by setting MR = Discount Drug's true MC.
10. $360.
11. Discount Drug is engaged in predatory pricing to maintain its reputation as a low-cost firm. By acting as if it has low costs in Town A, the "demonstration market," Discount Drug deters Value Drug from enterying Town B. Discount Drug then enjoys a monopoly in Town B, the "recoupment market."

(3) [Perfect price discrimination: 42 pts]

1. Marginal revenue has intercept = $13 on price axis and slope = -1/1 million.
2. $9.
3. $13.
4. $7.
5. 8 million, 12 million.
6. $72 million, $120 million.
7. $24 million, $48 million.
8. $48 million, $72 million.
9. $16 million, $0 million.

(4) [Monopoly price discrimination: 8 pts]

1. $4.50.
2. $8.00.

Critical thinking [8 pts]

• To prove that IBM was engaged in monopolization in violation of the Sherman Act Section 2 in the U.S., T3 Technologies must show that IBM (1) possessed monopoly power, and (2) intended to acquire it. T3 would probably succeed in showing that IBM possessed monopoly power because, as the dominant maker of mainframe computers, IBM had large market share. T3 would probably also succeed in showing that IBM intended to monopolize because, by refusing to license critical software, IBM seemed to be "refusing to deal" for anticompetitive reasons.

Test 9 Version B

(1) [Cases: 10 pts]

1. Utah Pie v. Continental Baking (1967).
2. Berkey Photo v. Kodak (1979).
3. Standard Oil v. U.S. (1911).
4. U.S. v. U.S. Steel (1920).
5. MCI v. AT&T (1982).

(2) [Predatory pricing: 33 pts]

1. $5.
2. $180.
3. $6.
4. $320.
5. $250.
6. No, because the start-up costs are greater than the expected profit in Town B.
7. $40.
8. 60. This quantity gives Discount Drug zero profit in Town A, but deters Value Drug from entering Town B.
9. 60, because Discount Drug will then be a monopoly in Town B. Profit-maximizing quantity is found by setting MR = Discount Drug's true MC.
10. $180.
11. Discount Drug is engaged in predatory pricing to maintain its reputation as a low-cost firm. By acting as if it has low costs in Town A, the "demonstration market," Discount Drug deters Value Drug from enterying Town B. Discount Drug then enjoys a monopoly in Town B, the "recoupment market."

(3) [Perfect price discrimination: 42 pts]

1. Marginal revenue has intercept = $13 on price axis and slope = -1/1 million.
2. $10.
3. $13.
4. $9.
5. 6 million, 8 million.
6. $60 million, $88 million.
7. $24 million, $40 million.
8. $36 million, $48 million.
9. $9 million, $0 million.

(4) [Monopoly price discrimination: pts]

1. $7.50.
2. $10.00.

Critical thinking [10 pts]

• Same as Version A.

[end of answer key]