Part B: TRUE or FALSE or UNCERTAIN and EXPLAIN: For each of the following statements decide whether each is true or false or whether it is not possible to determine given the information Most importantly, give the reasoning behind your answer. (Answer any four questions in this part) 1. Under second degree price discrimination with a group of low demanders and another of high demanders, a profit-maximizing monopolist will extract all the surplus available from the high demanders False. The Monopolist extracts all the surplus from the low type and not the high type. The high type is allowed a surplus which is just enough to prevent him from masquerading 2. A law requiring multinational companies that have their headquarters in the U.S. to charge the same prices in home and foreign markets for their products will receive strong support from American custom Uncertain. With price discrimination allowed the high types loose and the low types gain so it depends which types are the American consumers 3.The optimal number of firms undertaking research is higher under patents than under prizes(we are not going to cover this topic in spring 2003) Lucky batch yet again: We did not reach this far 4. Unless all consumers in a market are fully informed the full information competitive price equilibrium can never be attained This is False. The Tourists and the Natives model shows that we require a substantially high proportion of the population to be informed and not all 6. In the Hotelling model with two firms where their locations are fixed at the two ends of the city there does not exist an equilibrium in the pricing game if the transport costs are linea his is False. Given location it does not matter whether the transport costs are linear or are quadratic. Its only when we consider both location and pricing game that it matters Part C: Long Questions: Answer any three from this partPart B: TRUE or FALSE or UNCERTAIN and EXPLAIN: For each of the following statements, decide whether each is true or false or whether it is not possible to determine given the information. Most importantly, give the reasoning behind your answer. (Answer any four questions in this part). 1.Under second degree price discrimination with a group of low demanders and another of high demanders, a profit-maximizing monopolist will extract all the surplus available from the high demanders. False. The Monopolist extracts all the surplus from the low type and not the high type. The high type is allowed a surplus which is just enough to prevent him from masquerading. 2.A law requiring multinational companies that have their headquarters in the U.S. to charge the same prices in home and foreign markets for their products will receive strong support from American customers. Uncertain. With price discrimination allowed the high types loose and the low types gain so it depends which types are the American consumers. 3.The optimal number of firms undertaking research is higher under patents than under prizes (we are not going to cover this topic in spring 2003). Lucky batch yet again: We did not reach this far. 4. Unless all consumers in a market are fully informed the full information competitive price equilibrium can never be attained. This is False. The Tourists and the Natives model shows that we require a substantially high proportion of the population to be informed and not all. 6. In the Hotelling model with two firms where their locations are fixed at the two ends of the city there does not exist an equilibrium in the pricing game if the transport costs are linear. This is False. Given location it does not matter whether the transport costs are linear or are quadratic. Its only when we consider both location and pricing game that it matters. Part C: Long Questions: Answer any three from this part: