Question 1

Which of the following will prevent firms from engaging in price discrimination?

Accepted Answer

A) yield management 
B) arbitrage 
C) transactions costs 
D) odd pricing 
A) yield management 
B) arbitrage 
C) transactions costs 
D) odd pricing

Question 2

Until the early 1980s, The Walt Disney Company used a pricing strategy in which visitors to its theme parks paid a low admission fee and also paid for rides.This pricing strategy is an example of

Accepted Answer

A) perfect price discrimination. 
B) cost-plus pricing. 
C) a two-part tariff. 
D) monopoly pricing. 
A) perfect price discrimination. 
B) cost-plus pricing. 
C) a two-part tariff. 
D) monopoly pricing.

Question 3

Suppose the per-unit production cost of a book is $4.00 and the retail price is $32.If the book publisher sells books to a bookstore at a 40 percent discount, what is the amount of the publisher's markup per book? Assume that bookstores sell books at the retail price.

Accepted Answer

A) $12.80 
B) $15.20 
C) $19.20 
D) $21.60 
A) $12.80 
B) $15.20 
C) $19.20 
D) $21.60

Question 4

A firm's efforts to increase profit through price discrimination can be undermined by

Accepted Answer

A) arbitrage by buyers. 
B) consumer ignorance. 
C) differences in elasticity of demand. 
D) seller market power. 
A) arbitrage by buyers. 
B) consumer ignorance. 
C) differences in elasticity of demand. 
D) seller market power.

Question 5

Delaware and North Dakota have identical state gasoline taxes of 23.0 cents per gallon.When added to the federal gasoline tax of 18.4 cents per gallon, the total tax on one gallon of gasoline in these two states is 41.4 cents.On October 19, 2017, the average price of one gallon of regular gasoline was $2.25 in Delaware and $2.33 in North Dakota.Briefly explain whether this is an example of price discrimination.Assume that the gasoline being sold is identical in both states and there is no cost difference in the gasoline.
Sources: gaspricewatch.com and taxfoundation.org

Accepted Answer

This appears to be a case of p

Question 6

Figure 16-5
  
-Refer to Figure 16-5.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 competitive price.(This is also called an optimal two-part tariff.)What is the per-unit price it should charge, if any?

Accepted Answer

A) It should not charge a price per unit; just a flat fee to consume as much of the product as desired. 
B) It should charge a range of prices from $40 to $12. 
C) $12 
D) $16 
A) It should not charge a price per unit; just a flat fee to consume as much of the product as desired. 
B) It should charge a range of prices from $40 to $12. 
C) $12 
D) $16

Question 7

Consumers who will pay high prices to be among the first to own certain new products are called

Accepted Answer

A) savvy consumers. 
B) naive consumers. 
C) gullible. 
D) early adopters. 
A) savvy consumers. 
B) naive consumers. 
C) gullible. 
D) early adopters.

Question 8

Figure 16-7
   
The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its estimated demand curve for cocktails.
-Refer to Figure 16-7.The owners of the Lizard Lounge are considering the following four pricing options:
A.A single price scheme where the cocktail price equals the monopoly price.
B.A single price scheme where the cocktail price equals the competitive price.
C.A two-part tariff: a monopoly price for cocktails and a cover charge that will generate total revenue equal to the area X.
D.A two-part tariff: a competitive price for cocktails and a cover charge that will generate total revenue equal to the area X + Y + Z.
Under which scheme are the Lounge customers best off?

Accepted Answer

A) scheme a 
B) scheme b 
C) scheme c 
D) scheme d 
A) scheme a 
B) scheme b 
C) scheme c 
D) scheme d

Question 9

Some firms practice odd pricing because

Accepted Answer

A) they believe that customers will buy a larger quantity with an odd price. 
B) it is a way to price discriminate. 
C) it is too difficult for sellers to reeducate buyers into accepting even prices. 
D) it lowers transactions costs. 
A) they believe that customers will buy a larger quantity with an odd price. 
B) it is a way to price discriminate. 
C) it is too difficult for sellers to reeducate buyers into accepting even prices. 
D) it lowers transactions costs.

Question 10

Which of the following pricing strategies allows a firm to earn economic profit?

Accepted Answer

A) price discrimination 
B) charging a price equal to marginal cost 
C) charging a price equal to the average total cost of production 
D) charging a price equal to the average variable cost of production 
A) price discrimination 
B) charging a price equal to marginal cost 
C) charging a price equal to the average total cost of production 
D) charging a price equal to the average variable cost of production

Question 11

Odd pricing became common in the late 19th century.Although the origins of odd pricing are uncertain, several explanations for the practice have been given.Which of the following is one of these explanations?

Accepted Answer

A) Odd pricing forced employees to give customers change. This made it more likely that employees would record sales rather than pocketing their customers' money. 
B) Odd pricing began in an era when it was difficult for owners and managers of firms to determine the marginal cost of the goods and services they sold. Odd prices were rough estimates designed to cover costs plus earn firms a profit. 
C) Odd pricing was begun in England in the 1700s when America was part of the British Empire. Members of the British Royal Court were given the task of pricing products. After independence, merchants in the United States carried on the practice of odd pricing. 
D) After the passage of the Sherman Act in 1890, merchants used odd pricing as a means of avoiding prosecution for antitrust violations. 
A) Odd pricing forced employees to give customers change. This made it more likely that employees would record sales rather than pocketing their customers' money. 
B) Odd pricing began in an era when it was difficult for owners and managers of firms to determine the marginal cost of the goods and services they sold. Odd prices were rough estimates designed to cover costs plus earn firms a profit. 
C) Odd pricing was begun in England in the 1700s when America was part of the British Empire. Members of the British Royal Court were given the task of pricing products. After independence, merchants in the United States carried on the practice of odd pricing. 
D) After the passage of the Sherman Act in 1890, merchants used odd pricing as a means of avoiding prosecution for antitrust violations.

Question 12

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.

Question 13

The following table contains the actual prices charged by four Web sites for the PlayStation 4 game Horizon Zero Dawn in October 2017.
   
Explain whether the information in this table contradicts the law of one price.

Accepted Answer

The data in the table does not

Question 14

Figure 16-4
  
-Refer to Figure 16-4.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 15

Some consumer electronics products such as OLED TVs, Blu-ray players, and digital cameras, are introduced at very high prices but over time, their prices start falling (beyond what could be attributed to falling costs as companies take advantage of economies of scale and cheaper technologies).Which of the following is the best explanation for this observation?

Accepted Answer

A) More firms are likely to enter the consumer electronics market over time, forcing market prices down. 
B) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait. 
C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods. 
D) After satisfying the demand for early adopters, firms lower price to attract the more price-sensitive consumers. 
A) More firms are likely to enter the consumer electronics market over time, forcing market prices down. 
B) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait. 
C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods. 
D) After satisfying the demand for early adopters, firms lower price to attract the more price-sensitive consumers.

Question 16

Which of the following is not an example of price discrimination?

Accepted Answer

A) Adobe Systems offers software at discounted prices to students and faculty at K-12 and university levels. 
B) Unlike foreign tourists, citizens of Cambodia are exempted from paying an admission fee to the temples of Angkor. 
C) Senior citizens may purchase special fare tickets for public transportation that are not available to others. 
D) Buyers at an automotive parts store receive a discount for bulk buying because the store is able to pass on to its customers some of the lower average cost for producing large quantities. 
A) Adobe Systems offers software at discounted prices to students and faculty at K-12 and university levels. 
B) Unlike foreign tourists, citizens of Cambodia are exempted from paying an admission fee to the temples of Angkor. 
C) Senior citizens may purchase special fare tickets for public transportation that are not available to others. 
D) Buyers at an automotive parts store receive a discount for bulk buying because the store is able to pass on to its customers some of the lower average cost for producing large quantities.

Question 17

If the selling price of a firm's product is $200 and the estimated average cost of producing this product is $150, what is the firm's markup?

Accepted Answer

A) 75 percent 
B) 33.33 percent 
C) 25 percent 
D) impossible to determine with the information given 
A) 75 percent 
B) 33.33 percent 
C) 25 percent 
D) impossible to determine with the information given

Question 18

The expenses you encounter when you buy in one market and sell in a distant market are known as

Accepted Answer

A) production costs. 
B) fixed costs. 
C) transactions costs. 
D) sunk costs. 
A) production costs. 
B) fixed costs. 
C) transactions costs. 
D) sunk costs.

Question 19

Insurance companies typically charge women lower prices than men for automobile insurance.Is this an example of price discrimination?

Accepted Answer

A) No, because, on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women. 
B) Yes, because the costs of selling insurance to men and women are the same. 
C) Yes, because insurance companies can prevent arbitrage; that is, women cannot transfer their insurance coverage to men. 
D) No, because there are too many insurance companies for any one company to have market power. A firm must possess market power in order to practice price discrimination. 
A) No, because, on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women. 
B) Yes, because the costs of selling insurance to men and women are the same. 
C) Yes, because insurance companies can prevent arbitrage; that is, women cannot transfer their insurance coverage to men. 
D) No, because there are too many insurance companies for any one company to have market power. A firm must possess market power in order to practice price discrimination.

Question 20

The price of admission to Walt Disney World

Accepted Answer

A) can vary by your age and address. 
B) is the same for everyone. 
C) is determined by the weather on the day of admission. 
D) is kept low to attract customers, but prices of food and souvenirs inside the park vary by your age, address and other factors. 
A) can vary by your age and address. 
B) is the same for everyone. 
C) is determined by the weather on the day of admission. 
D) is kept low to attract customers, but prices of food and souvenirs inside the park vary by your age, address and other factors.

Which of the following will prevent firms from engaging in price discrimination?

Until the early 1980s, The Walt Disney Company used a pricing strategy in which visitors to its theme parks paid a low admission fee and also paid for rides.This pricing strategy is an example of

Suppose the per-unit production cost of a book is $4.00 and the retail price is $32.If the book publisher sells books to a bookstore at a 40 percent discount, what is the amount of the publisher's markup per book? Assume that bookstores sell books at the retail price.

A firm's efforts to increase profit through price discrimination can be undermined by

Consumers who will pay high prices to be among the first to own certain new products are called

Some firms practice odd pricing because

Which of the following pricing strategies allows a firm to earn economic profit?

Odd pricing became common in the late 19th century.Although the origins of odd pricing are uncertain, several explanations for the practice have been given.Which of the following is one of these explanations?

With an optimal two-part tariff

The following table contains the actual prices charged by four Web sites for the PlayStation 4 game Horizon Zero Dawn in October 2017. Explain whether the information in this table contradicts the law of one price.

Which of the following is not an example of price discrimination?

If the selling price of a firm's product is $200 and the estimated average cost of producing this product is $150, what is the firm's markup?

The expenses you encounter when you buy in one market and sell in a distant market are known as

Insurance companies typically charge women lower prices than men for automobile insurance.Is this an example of price discrimination?

The price of admission to Walt Disney World

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Exam 16: Pricing Strategy

Which of the following will prevent firms from engaging in price discrimination?

Until the early 1980s, The Walt Disney Company used a pricing strategy in which visitors to its theme parks paid a low admission fee and also paid for rides.This pricing strategy is an example of

Suppose the per-unit production cost of a book is $4.00 and the retail price is $32.If the book publisher sells books to a bookstore at a 40 percent discount, what is the amount of the publisher's markup per book? Assume that bookstores sell books at the retail price.

A firm's efforts to increase profit through price discrimination can be undermined by

Consumers who will pay high prices to be among the first to own certain new products are called

Some firms practice odd pricing because

Which of the following pricing strategies allows a firm to earn economic profit?

Odd pricing became common in the late 19th century.Although the origins of odd pricing are uncertain, several explanations for the practice have been given.Which of the following is one of these explanations?

With an optimal two-part tariff

The following table contains the actual prices charged by four Web sites for the PlayStation 4 game Horizon Zero Dawn in October 2017. Explain whether the information in this table contradicts the law of one price.

Which of the following is not an example of price discrimination?

If the selling price of a firm's product is $200 and the estimated average cost of producing this product is $150, what is the firm's markup?

The expenses you encounter when you buy in one market and sell in a distant market are known as

Insurance companies typically charge women lower prices than men for automobile insurance.Is this an example of price discrimination?

The price of admission to Walt Disney World

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters