1. True, False or Uncertain: When firms practice any form of price discrimination, both the firms involved and the consumers of the firms’ products are better off.
2. True, False or Uncertain: Far and away, the best way to regulate an industry with a small number of sellers is to limit the rate of return of each firm in the industry. This will lead to higher industry output and a purely competitive pricing structure.
3. True, False or Uncertain: In general, there should be no difference between the price charged by a monopolist who is regulated to have a normal rate of return and that charged by a purely competitive firm selling the same product in long run equilibrium. In fact, this is why monopolistic firms are regulated in this way.
4. True, False or Uncertain: One way the government could reduce the social cost of a monopoly would be to permit it practice price discrimination.
5. True, False or Uncertain: One of the best ways to regulate the profits of firm with some market power (e.g. a monopoly or a duopoly) would be to charge it an excess profits tax. This way, the government is better off, as are consumers, and so there is a social benefit to such a tax.
6. True, False or Uncertain: Anytime the satisfaction a person derives from one activity exceeds the satisfaction (s)he derives from another activity, (s)he'll try to do more of the first and less of the second.
7. True, False or Uncertain: In general, a person should be indifferent between a price reduction offer (on a new car, for example) and a rebate offer, so long as each offer leaves the buyer with same amount of money is his (her) pocket after the purchase.
8. Fu and Bar are twin sisters, having identical tastes for all goods and services. Mr. Gat, their father, subsidizes Fu's weekly food purchases, giving her half of her food bill back to her. Mr. Gat gives Bar $50 per week to spend any way she likes. True, False or Uncertain: If Fu and Bar end up consuming identical amounts of food each week, Bar can conclude that she is Mr. Gat's favorite daughter.
9. True, False or Uncertain: If the government allows the average consumer to deduct the (retail) sales taxes paid from his/her federal income tax, sales of practically all retail goods would increase; even sales of goods that consumers regard as inferior goods would increase.
10. The state government has a choice between increasing its tax on gasoline and increasing the income tax. True, False or Uncertain: If the increase in tax paid by the average consumer would be the same under both schemes, the average consumer would favor increasing the gasoline tax.
11. True, False or Uncertain: Barney finds that the additional satisfaction he gets from attending one more theater production increases the more theater productions he attends. We can reasonably expect Barney to attend more and more (i.e., increase his rate of attendance at) productions. Assume Barney lives in a place where he can attend as many productions as he wishes.