Question 1

If resale is easy, then

Accepted Answer

A) price discrimination won't work, because then only low-priced goods are sold. 
B) consumers' demand curves will shift to the low-priced good. 
C) firms will stop providing the good. 
D) price discrimination results in lower consumer surplus. 
A) price discrimination won't work, because then only low-priced goods are sold. 
B) consumers' demand curves will shift to the low-priced good. 
C) firms will stop providing the good. 
D) price discrimination results in lower consumer surplus.

Question 2

Two-part pricing offers a mechanism whereby the firm can

Accepted Answer

A) charge two different prices to distinct groups of customers. 
B) collect two times as much from consumers as a single-price monopoly can. 
C) capture some or all of the consumer surplus. 
D) reduce some of its fixed costs. 
A) charge two different prices to distinct groups of customers. 
B) collect two times as much from consumers as a single-price monopoly can. 
C) capture some or all of the consumer surplus. 
D) reduce some of its fixed costs.

Question 3

A specialized rice grower sells rice in two markets, the United States and Japan, and the marginal cost is the same in both markets. The price elasticity of demand in the United States is -2.0, and the price elasticity of demand in Japan is -1.5. If the grower practices group price discrimination, which country's consumers will pay a higher price and by how much?

Accepted Answer

PUS(1 + 1/-2)= PJ(1 + 1/-1.5).

Question 4

Many theme parks charge an entrance fee and a per-ride fee equal to zero. This is an example of

Accepted Answer

A) bundling. 
B) two-part pricing. 
C) multi-market price discrimination. 
D) perfect price discrimination. 
A) bundling. 
B) two-part pricing. 
C) multi-market price discrimination. 
D) perfect price discrimination.

Question 5

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

Accepted Answer

A) first-degree price discrimination. 
B) second-degree price discrimination. 
C) third-degree price discrimination. 
D) actual cost differences. 
A) first-degree price discrimination. 
B) second-degree price discrimination. 
C) third-degree price discrimination. 
D) actual cost differences.

Question 6

A monopoly will NOT be able to perfectly price discriminate if

Accepted Answer

A) each consumer does not reveal her reservation price. 
B) demand is very elastic. 
C) the firm's marginal cost curve is upward sloping. 
D) All of the above. 
A) each consumer does not reveal her reservation price. 
B) demand is very elastic. 
C) the firm's marginal cost curve is upward sloping. 
D) All of the above.

Question 7

Individual price discrimination is used when

Accepted Answer

A) firms are dealing with individual consumers, such as in a line at the coffee shop. 
B) firms cannot easily determine consumers' reservation prices. 
C) firms are selling to non-local buyers. 
D) salespeople are in a difficult industry, such as auto sales. 
A) firms are dealing with individual consumers, such as in a line at the coffee shop. 
B) firms cannot easily determine consumers' reservation prices. 
C) firms are selling to non-local buyers. 
D) salespeople are in a difficult industry, such as auto sales.

Question 8

If you purchase one pound of apples the price is $1.50 per pound. If you buy a five pound bag of apples, the cost is $5.00. This is most likely an example of

Accepted Answer

A) quantity discounts. 
B) lower marginal cost. 
C) lower marginal benefit. 
D) price gouging. 
A) quantity discounts. 
B) lower marginal cost. 
C) lower marginal benefit. 
D) price gouging.

Question 9

Two-part pricing allows the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Accepted Answer

A) True 
 B)False

Question 10

Bundling

Accepted Answer

A) is when firms sell multiple separate goods together for a single price. 
B) is where a firm wraps its fragile goods in special packaging and charges a higher price than if the goods are put into regular packaging. 
C) increases transaction costs for consumers. 
D) is illegal in most U.S. states. 
A) is when firms sell multiple separate goods together for a single price. 
B) is where a firm wraps its fragile goods in special packaging and charges a higher price than if the goods are put into regular packaging. 
C) increases transaction costs for consumers. 
D) is illegal in most U.S. states.

Question 11

Which of the following helps a monopoly perfectly price discriminate?

Accepted Answer

A) Product demand is known for each consumer. 
B) The product is perishable. 
C) The product is personalizable. 
D) All of the above. 
A) Product demand is known for each consumer. 
B) The product is perishable. 
C) The product is personalizable. 
D) All of the above.

Question 12

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will

Accepted Answer

A) set a higher price in the market that is more price elastic. 
B) set a lower price in the market that is more price elastic. 
C) set price so as to equate the elasticity of demand across markets. 
D) set price equal to marginal cost in both markets. 
A) set a higher price in the market that is more price elastic. 
B) set a lower price in the market that is more price elastic. 
C) set price so as to equate the elasticity of demand across markets. 
D) set price equal to marginal cost in both markets.

Question 13

With two-part pricing

Accepted Answer

A) the consumer puts down a deposit and then pays the rest when she picks up the goods purchased. 
B) the average price paid varies with the number of units purchased. 
C) the consumer is limited in the number of units that can be purchased. 
D) consumers are required to buy two units of a good. 
A) the consumer puts down a deposit and then pays the rest when she picks up the goods purchased. 
B) the average price paid varies with the number of units purchased. 
C) the consumer is limited in the number of units that can be purchased. 
D) consumers are required to buy two units of a good.

Question 14

If a firm is to capture all consumer surplus with two-part pricing when customers are different,

Accepted Answer

A) it must be able to charge different access fees. 
B) it cannot charge different prices for access fees. 
C) it must set unit price below marginal cost. 
D) it must set unit price above marginal cost. 
A) it must be able to charge different access fees. 
B) it cannot charge different prices for access fees. 
C) it must set unit price below marginal cost. 
D) it must set unit price above marginal cost.

Question 15

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Accepted Answer

A) airlines would charge the same price to each type of flyer. 
B) airlines would still charge business flyers a higher fare since the traveler's employer pays anyway. 
C) airlines would be driven out of business. 
D) airlines would counter by charging vacationers a higher fare. 
A) airlines would charge the same price to each type of flyer. 
B) airlines would still charge business flyers a higher fare since the traveler's employer pays anyway. 
C) airlines would be driven out of business. 
D) airlines would counter by charging vacationers a higher fare.

Question 16

Tie-in sales are most advantageous to the seller when

Accepted Answer

A) the demands for the two goods are negatively correlated. 
B) the demands for the two goods are positively correlated. 
C) the demands for the two goods are unrelated. 
D) there are economies of scope. 
A) the demands for the two goods are negatively correlated. 
B) the demands for the two goods are positively correlated. 
C) the demands for the two goods are unrelated. 
D) there are economies of scope.

Question 17

-The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, consumer surplus equals

Accepted Answer

A) A. 
B) A + B + C. 
C) C. 
D) zero. 
A) A. 
B) A + B + C. 
C) C. 
D) zero.

Question 18

A perfect price discriminating equilibrium maximizes

Accepted Answer

A) consumer surplus. 
B) the associated deadweight loss. 
C) the market inefficiency. 
D) total welfare. 
A) consumer surplus. 
B) the associated deadweight loss. 
C) the market inefficiency. 
D) total welfare.

Question 19

Firms price discriminate to maximize total revenue.

Accepted Answer

A) True 
 B)False

Question 20

What is one way firms can enforce tie-in sales?

Accepted Answer

A) One of the goods has no close substitutes. 
B) Through contractual arrangements 
C) Information asymmetry 
D) Any of the above. 
A) One of the goods has no close substitutes. 
B) Through contractual arrangements 
C) Information asymmetry 
D) Any of the above.

If resale is easy, then

Two-part pricing offers a mechanism whereby the firm can

Many theme parks charge an entrance fee and a per-ride fee equal to zero. This is an example of

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

A monopoly will NOT be able to perfectly price discriminate if

Individual price discrimination is used when

If you purchase one pound of apples the price is $1.50 per pound. If you buy a five pound bag of apples, the cost is $5.00. This is most likely an example of

Two-part pricing allows the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Bundling

Which of the following helps a monopoly perfectly price discriminate?

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will

With two-part pricing

If a firm is to capture all consumer surplus with two-part pricing when customers are different,

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Tie-in sales are most advantageous to the seller when

-The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, consumer surplus equals

A perfect price discriminating equilibrium maximizes

Firms price discriminate to maximize total revenue.

What is one way firms can enforce tie-in sales?

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

If resale is easy, then

Two-part pricing offers a mechanism whereby the firm can

Many theme parks charge an entrance fee and a per-ride fee equal to zero. This is an example of

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

A monopoly will NOT be able to perfectly price discriminate if

Individual price discrimination is used when

If you purchase one pound of apples the price is $1.50 per pound. If you buy a five pound bag of apples, the cost is $5.00. This is most likely an example of

Two-part pricing allows the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Bundling

Which of the following helps a monopoly perfectly price discriminate?

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will

With two-part pricing

If a firm is to capture all consumer surplus with two-part pricing when customers are different,

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Tie-in sales are most advantageous to the seller when

-The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, consumer surplus equals

A perfect price discriminating equilibrium maximizes

Firms price discriminate to maximize total revenue.

What is one way firms can enforce tie-in sales?

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