Question 1

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

Accepted Answer

A) Perfect price discrimination doesn't work. 
B) Transaction costs erode the profit of perfect price discrimination. 
C) Consumers are ill-informed and tend to complain too much. 
D) Uniform pricing is always more profitable and more fair as well. 
A) Perfect price discrimination doesn't work. 
B) Transaction costs erode the profit of perfect price discrimination. 
C) Consumers are ill-informed and tend to complain too much. 
D) Uniform pricing is always more profitable and more fair as well.

Question 2

A group price discriminator sells its product in Florida for three times the price it sells it in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0, the demand in Florida

Accepted Answer

A) has an elasticity of -6.0. 
B) is more price elastic than the demand in New York. 
C) has an elasticity of -1.2. 
D) has an elasticity of -0.67. 
A) has an elasticity of -6.0. 
B) is more price elastic than the demand in New York. 
C) has an elasticity of -1.2. 
D) has an elasticity of -0.67.

Question 3

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market ________, whereas in perfect price discrimination ________.

Accepted Answer

A) all units are sold where p = MC; only the last unit sold is at p = MC 
B) consumers receive some surplus; producers take all the surplus 
C) consumers are better off; income is redistributed away from consumers to producers 
D) All of the above. 
A) all units are sold where p = MC; only the last unit sold is at p = MC 
B) consumers receive some surplus; producers take all the surplus 
C) consumers are better off; income is redistributed away from consumers to producers 
D) All of the above.

Question 4

If people posing as vacationers were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

Accepted Answer

A) group price discrimination on the part of airlines would no longer be profitable. 
B) group price discrimination on the part of airlines would no longer be profit maximizing. 
C) the airlines would respond by raising the price charged to business flyers even more. 
D) the people reselling would not earn any economic profit. 
A) group price discrimination on the part of airlines would no longer be profitable. 
B) group price discrimination on the part of airlines would no longer be profit maximizing. 
C) the airlines would respond by raising the price charged to business flyers even more. 
D) the people reselling would not earn any economic profit.

Question 5

What is one reason suppliers might offer a discount for quantity purchases?

Accepted Answer

A) reduced storage costs 
B) lower marginal cost 
C) lower marginal benefit 
D) price gouging 
A) reduced storage costs 
B) lower marginal cost 
C) lower marginal benefit 
D) price gouging

Question 6

What is one reason online prices might be considerably lower than brick-and-mortar prices?

Accepted Answer

A) Online retailers engage in more price discrimination. 
B) Brick-and-mortar retailers engage in more price discrimination. 
C) Brick and mortar retailers may have higher costs. 
D) Online retailers are more likely to have steep demand curves. 
A) Online retailers engage in more price discrimination. 
B) Brick-and-mortar retailers engage in more price discrimination. 
C) Brick and mortar retailers may have higher costs. 
D) Online retailers are more likely to have steep demand curves.

Question 7

At the current price of a good, Al's consumer surplus equals 8 and Ben's consumer surplus equals 15. By using two-part pricing, a monopolist could increase his profit by

Accepted Answer

A) 8. 
B) 16. 
C) 15. 
D) 30. 
A) 8. 
B) 16. 
C) 15. 
D) 30.

Question 8

Without price discrimination, a firm

Accepted Answer

A) faces a tradeoff when pricing a good that has customers with different willingness to pay. 
B) cannot maximize profit. 
C) has no market power. 
D) does not get any producer surplus, with all of the surplus going to consumers. 
A) faces a tradeoff when pricing a good that has customers with different willingness to pay. 
B) cannot maximize profit. 
C) has no market power. 
D) does not get any producer surplus, with all of the surplus going to consumers.

Question 9

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market ________, whereas in perfect price discrimination ________.

Accepted Answer

A) all units are sold where P = MC; only the last unit sold is at P = MC 
B) deadweight loss varies depending on the shape of the MC curve; deadweight loss increases 
C) consumers are better off; producers lose some sales due to high prices. 
D) All of the above. 
A) all units are sold where P = MC; only the last unit sold is at P = MC 
B) deadweight loss varies depending on the shape of the MC curve; deadweight loss increases 
C) consumers are better off; producers lose some sales due to high prices. 
D) All of the above.

Question 10

A weapons producer sells guns to two countries that are at war with each other. The guns can be produced at a constant marginal cost of $10. The demand for guns from the two countries can be represented as:
QA = 100 - 2p
QB = 80 - 4p
Why is the weapons producer able to price discriminate?
What price will it charge to each country?

Accepted Answer

The firm can price discriminate because

Question 11

Group price discrimination results in social welfare that ________ under a single-price monopoly.

Accepted Answer

A) is greater than 
B) is lower than 
C) is the same as 
D) might be greater or might be lower than 
A) is greater than 
B) is lower than 
C) is the same as 
D) might be greater or might be lower than

Question 12

When there is a capacity constraint,

Accepted Answer

A) firms face sunk costs when deciding whether or not to expand. 
B) consumers will avoid the producer and go with a firm that has extra capacity. 
C) firms are not maximizing their profits during high season. 
D) firms can use peak-load pricing to increase profits during periods of high demand. 
A) firms face sunk costs when deciding whether or not to expand. 
B) consumers will avoid the producer and go with a firm that has extra capacity. 
C) firms are not maximizing their profits during high season. 
D) firms can use peak-load pricing to increase profits during periods of high demand.

Question 13

Relative to a single-price monopoly, the effect of group price discrimination on social welfare is

Accepted Answer

A) beneficial. 
B) detrimental. 
C) neutral. 
D) ambiguous. 
A) beneficial. 
B) detrimental. 
C) neutral. 
D) ambiguous.

Question 14

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. The profit-maximizing two-part tariff yields total revenue of

Accepted Answer

A) $24. 
B) $40. 
C) $16. 
D) $32. 
A) $24. 
B) $40. 
C) $16. 
D) $32.

Question 15

Which of the following is an example of mixed bundling?

Accepted Answer

A) A suit jacket 
B) Dinner at a buffet restaurant 
C) A desktop computer and monitor 
D) All of the above. 
A) A suit jacket 
B) Dinner at a buffet restaurant 
C) A desktop computer and monitor 
D) All of the above.

Question 16

What is one reason consumers might demand a discount for quantity purchases?

Accepted Answer

A) higher storage costs 
B) lower marginal cost 
C) lower marginal benefit 
D) price gouging 
A) higher storage costs 
B) lower marginal cost 
C) lower marginal benefit 
D) price gouging

Question 17

Airlines offer lower prices to vacationers than to business travelers because

Accepted Answer

A) of government regulations requiring them to do so. 
B) business travelers do not care at all about costs. 
C) business travelers are less flexible in their travel plans than vacationers are. 
D) airlines know that business travelers enjoy flying more than vacationers do. 
A) of government regulations requiring them to do so. 
B) business travelers do not care at all about costs. 
C) business travelers are less flexible in their travel plans than vacationers are. 
D) airlines know that business travelers enjoy flying more than vacationers do.

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

A group price discriminator sells its product in Florida for three times the price it sells it in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0, the demand in Florida

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market , whereas in perfect price discrimination .

If people posing as vacationers were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

What is one reason suppliers might offer a discount for quantity purchases?

What is one reason online prices might be considerably lower than brick-and-mortar prices?

At the current price of a good, Al's consumer surplus equals 8 and Ben's consumer surplus equals 15. By using two-part pricing, a monopolist could increase his profit by

Without price discrimination, a firm

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market , whereas in perfect price discrimination .

Group price discrimination results in social welfare that ________ under a single-price monopoly.

When there is a capacity constraint,

Relative to a single-price monopoly, the effect of group price discrimination on social welfare is

Which of the following is an example of mixed bundling?

What is one reason consumers might demand a discount for quantity purchases?

Airlines offer lower prices to vacationers than to business travelers because

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

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

A group price discriminator sells its product in Florida for three times the price it sells it in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0, the demand in Florida

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market ________, whereas in perfect price discrimination ________.

If people posing as vacationers were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

What is one reason suppliers might offer a discount for quantity purchases?

What is one reason online prices might be considerably lower than brick-and-mortar prices?

At the current price of a good, Al's consumer surplus equals 8 and Ben's consumer surplus equals 15. By using two-part pricing, a monopolist could increase his profit by

Without price discrimination, a firm

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market ________, whereas in perfect price discrimination ________.

Group price discrimination results in social welfare that ________ under a single-price monopoly.

When there is a capacity constraint,

Relative to a single-price monopoly, the effect of group price discrimination on social welfare is

Which of the following is an example of mixed bundling?

What is one reason consumers might demand a discount for quantity purchases?

Airlines offer lower prices to vacationers than to business travelers because

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

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market , whereas in perfect price discrimination .

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market , whereas in perfect price discrimination .