ECON 1014 - Exam 3 Review Questions with Answers Updated.

Price Discrimination - Answer charging more than one price for the same product. (increase surplus as compared to simple monopoly) Is there Arbitrage? - Answer No. What is Elasticity equal to? - Answer Escape What happens when price discrimination increases output? - Answer The total surplus will increase. Tying - Answer Consumption of one good requires the consumption of a second good produced by same firm. (allows firms to price discriminate). Objectives for firms - Answer - price discriminate by pricing the base good below the cost and the variable good above cost. - charge a different price to every consumer based on their usage of the variable good. Bundling - Answer Requires that a good be bought along with other goods. (Examples: Cable TV, Software, Newspaper, Vacation packages) Oligopoly - Answer Market with a small number of competitors Oligopoly Behavior - Answer Complicated because it's not a single forms Strategic Decision-Making - Answer Decision-making in situations that are interactive. Cartel - Answer Attempts to move a market from competitive to what would occur if it were controlled by a single monopoly. Game Theory - Answer Models of strategic interaction