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Homework answers / question archive / 1) In vertical separation, the downstream firm usually makes more profit than the upstream firm does (TRUE or FALSE) 2) An example of horizontal merger is MTN merging with Vodacom (TRUE or FALSE) 3) A monopolist is faced with two different demands for its products from low-type consumers and high-type consumers

1) In vertical separation, the downstream firm usually makes more profit than the upstream firm does (TRUE or FALSE) 2) An example of horizontal merger is MTN merging with Vodacom (TRUE or FALSE) 3) A monopolist is faced with two different demands for its products from low-type consumers and high-type consumers

Economics

1) In vertical separation, the downstream firm usually makes more profit than the upstream firm does (TRUE or FALSE)
2) An example of horizontal merger is MTN merging with Vodacom (TRUE or FALSE)

3) A monopolist is faced with two different demands for its products from low-type consumers and high-type consumers.

Demand for low-type consumers is q1 = 60 – ½ p

Demand for high-type consumers is q1 = 80 – ½ p

It costs the monopolist $ 20 to supply its products i.e MC (Marginal Cost) = 20 and he charges consumers $ 20 for his product.

How much profit does the monopolist earn from supplying his product to both low-type and high type consumers?

Select one:

  1. 1000
  2. 1400
  3. 2500
  4. 0
  5. 5000

4) Firms who want to capture more surplus can use the following mechanism (s):

  1. Quality discrimination
  2. Block pricing techniques
  3. Price segmentation

Select one:

  1. I and II only
  2. III only
  3. I, II and III
  4. II only
  5. I only

5) Where there is a problem of successive monopolies and double marginalization the firms can use various methods to address the resulting problem of excessively high prices and reduces profits.

Which one of the following methods is/ are most likely to work?

  1. The upstream firm setting a maximum retail price that the downstream firm must charge.
  2. The upstream firm taking over the downstream firm
  3. The upstream firm choosing the downstream firm by use of a franchise

Option 1

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