Question 1

Reverse auctions

Accepted Answer

A) require customers to fly at unpopular times. 
B) allow firms to identify customers that have very elastic demand curves. 
C) are used to keep high paying customers from spending too little money. 
D) Both A and B. 
A) require customers to fly at unpopular times. 
B) allow firms to identify customers that have very elastic demand curves. 
C) are used to keep high paying customers from spending too little money. 
D) Both A and B.

Question 2

If the price of business broadband is greater than that of residential broadband, all else equal

Accepted Answer

A) business has greater price elasticity than residential. 
B) residential has greater price elasticity than business. 
C) both have inelastic demand curves. 
D) generally speaking, broadband is equally priced. 
A) business has greater price elasticity than residential. 
B) residential has greater price elasticity than business. 
C) both have inelastic demand curves. 
D) generally speaking, broadband is equally priced.

Question 3

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part price with the lump sum tariff equal to the total amount of potential consumer surplus.

Accepted Answer

The producer wants to set the lump sum p

Question 4

Which of the following is an example for group price discrimination?

Accepted Answer

A) A BMW selling for more than a VW. 
B) Local residents receiving a discount at the local golf course. 
C) The fact that a razor is cheap and blades are expensive. 
D) A hotel charging more for a room if the customers bring pets. 
A) A BMW selling for more than a VW. 
B) Local residents receiving a discount at the local golf course. 
C) The fact that a razor is cheap and blades are expensive. 
D) A hotel charging more for a room if the customers bring pets.

Question 5

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one. This is necessarily an example of quantity discrimination.

Accepted Answer

A) True 
 B)False

Question 6

In two-part pricing

Accepted Answer

A) consumers pay a lump-sum for all the goods purchased. 
B) the consumer must pay a lump sum if he buys more than a certain number of units of a good. 
C) a firm charges more for units purchased on the weekend than for those purchased during the week. 
D) the average price paid per unit is higher with a small number of units purchased than if a large number of units is purchased. 
A) consumers pay a lump-sum for all the goods purchased. 
B) the consumer must pay a lump sum if he buys more than a certain number of units of a good. 
C) a firm charges more for units purchased on the weekend than for those purchased during the week. 
D) the average price paid per unit is higher with a small number of units purchased than if a large number of units is purchased.

Question 7

Which of the following is an example of peak-load pricing?

Accepted Answer

A) Charging less for vacations to Hawaii during December and January. 
B) Charging more for electricity on hot days. 
C) Setting price equal to marginal cost when there is a capacity constraint. 
D) Selling excess capacity at lower prices. 
A) Charging less for vacations to Hawaii during December and January. 
B) Charging more for electricity on hot days. 
C) Setting price equal to marginal cost when there is a capacity constraint. 
D) Selling excess capacity at lower prices.

Question 8

Many college football teams require a "donation" in order to purchase season tickets. This is an example of

Accepted Answer

A) price gouging. 
B) tie-in sale. 
C) two-part pricing. 
D) anti-competitive behavior. 
A) price gouging. 
B) tie-in sale. 
C) two-part pricing. 
D) anti-competitive behavior.

Question 9

When firms price discriminate, they

Accepted Answer

A) get additional surplus from consumers who would have bought at the profit-maximizing uniform price but lose sales because of the higher prices. 
B) maintain surplus from existing consumers but pick up additional consumers that would not have bought at the profit-maximizing uniform price. 
C) get additional surplus from consumers who would have bought at the profit-maximizing uniform price. 
D) None of the above. 
A) get additional surplus from consumers who would have bought at the profit-maximizing uniform price but lose sales because of the higher prices. 
B) maintain surplus from existing consumers but pick up additional consumers that would not have bought at the profit-maximizing uniform price. 
C) get additional surplus from consumers who would have bought at the profit-maximizing uniform price. 
D) None of the above.

Question 10

A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm. Those who check in early are much more likely to use the hotel's pool. Explain why this price difference may not be price discrimination.

Accepted Answer

The marginal cost of providing a hotel s

Question 11

A firm engaging in group price discrimination

Accepted Answer

A) divides customers into groups and then charges each customer within each group a different price, similar to perfect price discrimination. 
B) divides customers into groups and then charges each group a different price. 
C) bundles products into groups and sells the groups at different prices. 
D) finds the average reservation price for a group of customers and sell its goods at that price. 
A) divides customers into groups and then charges each customer within each group a different price, similar to perfect price discrimination. 
B) divides customers into groups and then charges each group a different price. 
C) bundles products into groups and sells the groups at different prices. 
D) finds the average reservation price for a group of customers and sell its goods at that price.

Question 12

Disneyland price discriminates because

Accepted Answer

A) everyone loves going to The Happiest Place on Earth, so they'll pay whatever Disneyland wants to charge. 
B) children are cheaper to service, so Disneyland can charge lower prices for a children's ticket. 
C) only a certain number of people can get into Disneyland at any given time, limiting supply, and the market demand curve is nearly completely inelastic. 
D) local residents likely wouldn't go to the park at prices Disneyland can charge for tourists, which would reduce Disneyland's profits. 
A) everyone loves going to The Happiest Place on Earth, so they'll pay whatever Disneyland wants to charge. 
B) children are cheaper to service, so Disneyland can charge lower prices for a children's ticket. 
C) only a certain number of people can get into Disneyland at any given time, limiting supply, and the market demand curve is nearly completely inelastic. 
D) local residents likely wouldn't go to the park at prices Disneyland can charge for tourists, which would reduce Disneyland's profits.

Question 13

When firms price discriminate, they turn ________ into ________.

Accepted Answer

A) producer surplus; revenue 
B) consumer surplus; profit 
C) revenue; producer surplus 
D) producer surplus; consumer surplus 
A) producer surplus; revenue 
B) consumer surplus; profit 
C) revenue; producer surplus 
D) producer surplus; consumer surplus

Question 14

Firms use various methods for identifying customers such as ________ and ________.

Accepted Answer

A) observable characteristics such as willingness to wait in long lines; their actions such as whether or not they live a long time 
B) observable characteristics such as age; their actions such as willingness to wait in long lines 
C) the color of their hair; whether or not they roll their eyes at high prices 
D) None of the above. 
A) observable characteristics such as willingness to wait in long lines; their actions such as whether or not they live a long time 
B) observable characteristics such as age; their actions such as willingness to wait in long lines 
C) the color of their hair; whether or not they roll their eyes at high prices 
D) None of the above.

Question 15

Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"?

Accepted Answer

A) Because they are worried about running out of supply, leaving some of their customers unhappy that they can't buy the good. 
B) Because they are trying to use scarcity as a way to improve the brand image of the good. 
C) Because they are limiting the possibility of arbitrage, where consumers buy in a low price area and resell in a higher price area. 
D) Because they are worried that they'll run out of the good during the all-important holiday season. 
A) Because they are worried about running out of supply, leaving some of their customers unhappy that they can't buy the good. 
B) Because they are trying to use scarcity as a way to improve the brand image of the good. 
C) Because they are limiting the possibility of arbitrage, where consumers buy in a low price area and resell in a higher price area. 
D) Because they are worried that they'll run out of the good during the all-important holiday season.

Question 16

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

Accepted Answer

A) because the demands for these two goods are positively correlated 
B) because the demands for these two goods are negatively correlated 
C) because the demands for these two goods are independent 
D) It violates the Clean Food Act of 1908. 
A) because the demands for these two goods are positively correlated 
B) because the demands for these two goods are negatively correlated 
C) because the demands for these two goods are independent 
D) It violates the Clean Food Act of 1908.

Question 17

If Ben values good X more than good Y and Catherine values good Y more than good X, a firm can increase its profits by

Accepted Answer

A) charging the same price for both goods. 
B) bundling the goods. 
C) selling the goods in a competitive market. 
D) charging one price per good. 
A) charging the same price for both goods. 
B) bundling the goods. 
C) selling the goods in a competitive market. 
D) charging one price per good.

Question 18

What is the primary difference between bundling and tie-ins?

Accepted Answer

A) Bundling is typically a one-off purchase. 
B) Contractual arrangements 
C) Tie-ins are one-off purchases. 
D) Bundling is illegal and tie-ins are legal. 
A) Bundling is typically a one-off purchase. 
B) Contractual arrangements 
C) Tie-ins are one-off purchases. 
D) Bundling is illegal and tie-ins are legal.

Question 19

The deadweight loss generated by a perfect-price-discriminating monopoly

Accepted Answer

A) equals the deadweight loss of a single-price monopoly. 
B) is greater than the deadweight loss of a single-price monopoly. 
C) equals zero. 
D) equals the sum of all lost consumer surplus. 
A) equals the deadweight loss of a single-price monopoly. 
B) is greater than the deadweight loss of a single-price monopoly. 
C) equals zero. 
D) equals the sum of all lost consumer surplus.

Question 20

While price discrimination is possible between two markets it is not possible in more than two.

Accepted Answer

A) True 
 B)False

Reverse auctions

If the price of business broadband is greater than that of residential broadband, all else equal

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part price with the lump sum tariff equal to the total amount of potential consumer surplus.

Which of the following is an example for group price discrimination?

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one. This is necessarily an example of quantity discrimination.

In two-part pricing

Which of the following is an example of peak-load pricing?

Many college football teams require a "donation" in order to purchase season tickets. This is an example of

When firms price discriminate, they

A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm. Those who check in early are much more likely to use the hotel's pool. Explain why this price difference may not be price discrimination.

A firm engaging in group price discrimination

Disneyland price discriminates because

When firms price discriminate, they turn into .

Firms use various methods for identifying customers such as and .

Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"?

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

If Ben values good X more than good Y and Catherine values good Y more than good X, a firm can increase its profits by

What is the primary difference between bundling and tie-ins?

The deadweight loss generated by a perfect-price-discriminating monopoly

While price discrimination is possible between two markets it is not possible in more than two.

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 10: Pricing With Market Power

Reverse auctions

If the price of business broadband is greater than that of residential broadband, all else equal

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part price with the lump sum tariff equal to the total amount of potential consumer surplus.

Which of the following is an example for group price discrimination?

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one. This is necessarily an example of quantity discrimination.

In two-part pricing

Which of the following is an example of peak-load pricing?

Many college football teams require a "donation" in order to purchase season tickets. This is an example of

When firms price discriminate, they

A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm. Those who check in early are much more likely to use the hotel's pool. Explain why this price difference may not be price discrimination.

A firm engaging in group price discrimination

Disneyland price discriminates because

When firms price discriminate, they turn ________ into ________.

Firms use various methods for identifying customers such as ________ and ________.

Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"?

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

If Ben values good X more than good Y and Catherine values good Y more than good X, a firm can increase its profits by

What is the primary difference between bundling and tie-ins?

The deadweight loss generated by a perfect-price-discriminating monopoly

While price discrimination is possible between two markets it is not possible in more than two.

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

When firms price discriminate, they turn into .

Firms use various methods for identifying customers such as and .