Question 1

Figure 16.4
  
-Refer to Figure 16.4.Suppose the firm represented in the diagram decides to practice perfect price discrimination.What is the profit-maximizing quantity?

Accepted Answer

A) 320 units 
B) 480 units 
C) 560 units 
D) 640 units 
A) 320 units 
B) 480 units 
C) 560 units 
D) 640 units

Question 2

Figure 16.4
  
-Refer to Figure 16.4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the per-unit price?

Accepted Answer

A) $28 
B) $24 
C) $12 
D) $8 
A) $28 
B) $24 
C) $12 
D) $8

Question 3

If marginal cost is zero, with an optimal two-part tariff,

Accepted Answer

A) total revenue is maximized. 
B) consumers maximize their surplus. 
C) the firm does not have to charge a fixed-fee portion. 
D) firms may not maximize profit. 
A) total revenue is maximized. 
B) consumers maximize their surplus. 
C) the firm does not have to charge a fixed-fee portion. 
D) firms may not maximize profit.

Question 4

One method of setting price using the cost-plus method is to add

Accepted Answer

A) a given percentage of marginal cost to marginal cost of production. 
B) a given percentage of fixed cost to total fixed cost. 
C) a given percentage of average total cost to average total cost. 
D) a given percentage of average variable cost to average total cost. 
A) a given percentage of marginal cost to marginal cost of production. 
B) a given percentage of fixed cost to total fixed cost. 
C) a given percentage of average total cost to average total cost. 
D) a given percentage of average variable cost to average total cost.

Question 5

Many Canadians living close to the US border regularly cross the border to buy milk, eggs, and other goods at considerably lower prices.
Is this an example of arbitrage?

Accepted Answer

A) Yes, because shoppers were able to purchase items at lower prices even after deducting their transaction costs. 
B) No, "arbitrage" means buying at a low price and reselling at a higher price but no resale takes place here. 
C) Yes, arbitrage applies even if no resale takes place; in this case the profits are pocketed by the customers themselves. 
D) No, "arbitrage" does not apply to markets that are not in the same geographic area. 
A) Yes, because shoppers were able to purchase items at lower prices even after deducting their transaction costs. 
B) No, "arbitrage" means buying at a low price and reselling at a higher price but no resale takes place here. 
C) Yes, arbitrage applies even if no resale takes place; in this case the profits are pocketed by the customers themselves. 
D) No, "arbitrage" does not apply to markets that are not in the same geographic area.

Question 6

The following table contains the actual prices charged by four websites for a blu-ray copy of the movie Despicable Me 2.
 $\begin{array}{|l|l|}
\hline \text { Amazon.ca } & 23.67 \
\hline \text { Chapters.ca } & 28.49 \
\hline \text { FutureShop.ca } & 24.99 \
\hline \text { Walmart.ca } & 24.97\
\hline
\end{array}$ 
Explain whether the information in this table contradicts the law of one price.

Accepted Answer

Unless there are big differenc

Question 7

Requiring those who have season tickets for a professional sports team to pay for equity seat rights or personal seat licenses shifts more of the burden of paying for a new stadium or arena to

Accepted Answer

A) the general public. 
B) the season ticket holders. 
C) the owners of the sports team. 
D) the city in which the stadium is located. 
A) the general public. 
B) the season ticket holders. 
C) the owners of the sports team. 
D) the city in which the stadium is located.

Question 8

Lou buys a classic Mario Bros.game from Evan for $30 and resells it on eBay for $60.Which of the following statements is false?

Accepted Answer

A) Lou has earned some arbitrage profits, assuming that transaction costs are negligible. 
B) The transaction has made Evan worse off because he underpriced the poster. 
C) Lou has probably incurred some costs in connection with this sale. 
D) It is possible that Evan has earned some producer surplus from this transaction. 
A) Lou has earned some arbitrage profits, assuming that transaction costs are negligible. 
B) The transaction has made Evan worse off because he underpriced the poster. 
C) Lou has probably incurred some costs in connection with this sale. 
D) It is possible that Evan has earned some producer surplus from this transaction.

Question 9

Buying at a low price in one market and reselling at a higher price in another market will

Accepted Answer

A) not generate any profit because of transportation costs. 
B) not generate any profit because of transactions costs. 
C) eventually eliminate all of the price differences. 
D) eventually eliminate most, but not necessarily all, of the price differences. 
A) not generate any profit because of transportation costs. 
B) not generate any profit because of transactions costs. 
C) eventually eliminate all of the price differences. 
D) eventually eliminate most, but not necessarily all, of the price differences.

Question 10

Table 16.2
 $\begin{array}{|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity Demanded } \
\text { in Middle Fall } \
\text { (tubes per week) }
\end{array} & \begin{array}{c}
\text { Price per } \
\text { Tube }
\end{array} & \begin{array}{c}
\text { Quantity Demanded in } \
\text { West Fall } \
\text { (tubes per week) }
\end{array} & \begin{array}{c}
\text { Price per } \
\text { Tube }
\end{array} \
\hline 1 & \$ 8 & 1 & \$ 5.00 \
\hline 2 & 7 & 2 & 4.50 \
\hline 3 & 6 & 3 & 4.00 \
\hline 4 & 5 & 4 & 3.50 \
\hline 5 & 4 & 5 & 3.00 \
\hline
\end{array}$ 
Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16.2. The average cost of production is constant at $2 per tube.
-Refer to Table 16.2.Which of the following statements is true about the two markets?

Accepted Answer

A) The demand in Middle Fall is more price elastic than the demand in West Fall. 
B) The demand in Middle Fall is less price elastic than the demand in West Fall. 
C) The demand in Middle Fall is more income elastic than the demand in West Fall. 
D) The demand in Middle Fall is less income elastic than the demand in West Fall. 
A) The demand in Middle Fall is more price elastic than the demand in West Fall. 
B) The demand in Middle Fall is less price elastic than the demand in West Fall. 
C) The demand in Middle Fall is more income elastic than the demand in West Fall. 
D) The demand in Middle Fall is less income elastic than the demand in West Fall.

Question 11

Which of the following does not arise from price discrimination?

Accepted Answer

A) an increase in producer surplus 
B) an increase in consumer surplus 
C) an increase in quantity sold 
D) an increase in profits 
A) an increase in producer surplus 
B) an increase in consumer surplus 
C) an increase in quantity sold 
D) an increase in profits

Question 12

Consider the following pricing strategies:
a)perfect price discrimination
b)charging different prices to different groups of customers
c)optimal two-part tariff
d)single-price monopoly pricing
Which of the pricing strategies allows a producer to capture the entire consumer surplus that would have gone to consumers under perfect competitive pricing?

Accepted Answer

A) a, b, c, and d 
B) a, b, and c only 
C) a and b only 
D) a and c only 
A) a, b, c, and d 
B) a, b, and c only 
C) a and b only 
D) a and c only

Question 13

Which of the following is a necessary condition for successful price discrimination?

Accepted Answer

A) The seller must possess market power. 
B) The buyer must possess market power. 
C) Transaction costs must be zero. 
D) Buyers must have identical inelastic demands. 
A) The seller must possess market power. 
B) The buyer must possess market power. 
C) Transaction costs must be zero. 
D) Buyers must have identical inelastic demands.

Question 14

Because each customer pays according to her willingness to pay, a consumer maximizes her consumer surplus under first-degree price discrimination.

Accepted Answer

A) True 
 B)False

Question 15

If a monopolist engages in perfect price discrimination, it will produce the same output level as a perfectly competitive industry.

Accepted Answer

A) True 
 B)False

Question 16

Figure 16.3
  
-Refer to Figure 16.3.Graph (a)represents a monopolist who cannot price discriminate and graph (b)represents a monopolist practicing perfect price discrimination.On each graph, identify the monopoly price, the monopoly output, the efficient output, and the areas representing profit, consumer surplus, and deadweight loss.

Accepted Answer

In graph (b), the monopoly output is equ

Question 17

Which of the following products allows the seller to identify different groups of consumers (segment the market)at virtually no cost?

Accepted Answer

A) early bird dinner specials 
B) books sold online 
C) a pair of Bose speakers 
D) iPhones 
A) early bird dinner specials 
B) books sold online 
C) a pair of Bose speakers 
D) iPhones

Question 18

Figure 16.4
  
-Refer to Figure 16.4.Consider the following two pricing strategies:
a)a fixed fee and a per-unit price equal to the monopoly price
b)a fixed fee and a per-unit price equal to the competitive price
The firm represented in the diagram earns a higher profit under strategy ________ and deadweight loss is eliminated under ________.

Accepted Answer

A) b; b 
B) a; b 
C) a; neither strategy 
D) b; neither strategy 
A) b; b 
B) a; b 
C) a; neither strategy 
D) b; neither strategy

Question 19

Which of the following describes two-part tariff pricing?

Accepted Answer

A) A firm charges two different prices for the same good. 
B) An importer has to pay a tax at the nation's borders, and a sales tax when the good is sold. 
C) A buyer pays an initial price for entrance to the market and an additional fee for each unit of the product purchased. 
D) A buyer must pay a down payment and monthly payments to buy big-ticket items such as a car, a plasma television or a suite of furniture. 
A) A firm charges two different prices for the same good. 
B) An importer has to pay a tax at the nation's borders, and a sales tax when the good is sold. 
C) A buyer pays an initial price for entrance to the market and an additional fee for each unit of the product purchased. 
D) A buyer must pay a down payment and monthly payments to buy big-ticket items such as a car, a plasma television or a suite of furniture.

Question 20

With an optimal two-part tariff,

Accepted Answer

A) consumer surplus equals producer surplus. 
B) all consumer surplus is transformed into profit. 
C) consumers maximize consumer surplus. 
D) the firm earns zero profit. 
A) consumer surplus equals producer surplus. 
B) all consumer surplus is transformed into profit. 
C) consumers maximize consumer surplus. 
D) the firm earns zero profit.

Figure 16.4 -Refer to Figure 16.4.Suppose the firm represented in the diagram decides to practice perfect price discrimination.What is the profit-maximizing quantity?

Figure 16.4 -Refer to Figure 16.4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the per-unit price?

If marginal cost is zero, with an optimal two-part tariff,

One method of setting price using the cost-plus method is to add

Many Canadians living close to the US border regularly cross the border to buy milk, eggs, and other goods at considerably lower prices. Is this an example of arbitrage?

The following table contains the actual prices charged by four websites for a blu-ray copy of the movie Despicable Me 2. Amazon.ca 23.67 Chapters.ca 28.49 FutureShop.ca 24.99 Walmart.ca 24.97 Explain whether the information in this table contradicts the law of one price.

Requiring those who have season tickets for a professional sports team to pay for equity seat rights or personal seat licenses shifts more of the burden of paying for a new stadium or arena to

Lou buys a classic Mario Bros.game from Evan for $30 and resells it on eBay for $60.Which of the following statements is false?

Buying at a low price in one market and reselling at a higher price in another market will

Which of the following does not arise from price discrimination?

Which of the following is a necessary condition for successful price discrimination?

Because each customer pays according to her willingness to pay, a consumer maximizes her consumer surplus under first-degree price discrimination.

If a monopolist engages in perfect price discrimination, it will produce the same output level as a perfectly competitive industry.

Which of the following products allows the seller to identify different groups of consumers (segment the market)at virtually no cost?

Which of the following describes two-part tariff pricing?

With an optimal two-part tariff,

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Firms, the Stock Market, and Corporate Governance

Filters

Exam 16: Pricing Strategy

Figure 16.4 -Refer to Figure 16.4.Suppose the firm represented in the diagram decides to practice perfect price discrimination.What is the profit-maximizing quantity?

Figure 16.4 -Refer to Figure 16.4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the per-unit price?

If marginal cost is zero, with an optimal two-part tariff,

One method of setting price using the cost-plus method is to add

Many Canadians living close to the US border regularly cross the border to buy milk, eggs, and other goods at considerably lower prices. Is this an example of arbitrage?

The following table contains the actual prices charged by four websites for a blu-ray copy of the movie Despicable Me 2. Amazon.ca 23.67 Chapters.ca 28.49 FutureShop.ca 24.99 Walmart.ca 24.97 Explain whether the information in this table contradicts the law of one price.

Requiring those who have season tickets for a professional sports team to pay for equity seat rights or personal seat licenses shifts more of the burden of paying for a new stadium or arena to

Lou buys a classic Mario Bros.game from Evan for $30 and resells it on eBay for $60.Which of the following statements is false?

Buying at a low price in one market and reselling at a higher price in another market will

Which of the following does not arise from price discrimination?

Which of the following is a necessary condition for successful price discrimination?

Because each customer pays according to her willingness to pay, a consumer maximizes her consumer surplus under first-degree price discrimination.

If a monopolist engages in perfect price discrimination, it will produce the same output level as a perfectly competitive industry.

Which of the following products allows the seller to identify different groups of consumers (segment the market)at virtually no cost?

Which of the following describes two-part tariff pricing?

With an optimal two-part tariff,

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Firms, the Stock Market, and Corporate Governance

Filters