Question 1

Yield management and price discrimination have enabled firms to increase profits and, at the same time,

Accepted Answer

A) reduce the cost of production. 
B) capture some consumer surplus. 
C) reduce transactions costs. 
D) transfer some producer surplus to consumers. 
A) reduce the cost of production. 
B) capture some consumer surplus. 
C) reduce transactions costs. 
D) transfer some producer surplus to consumers.

Question 2

When firms adopt successful dynamic pricing strategies, typically

Accepted Answer

A) all consumers gain by paying lower prices. 
B) all consumers lose by paying higher prices. 
C) some consumers gain and some lose, but as a group, consumers gain. 
D) some consumers gain and some lose, but as a group, consumers lose. 
A) all consumers gain by paying lower prices. 
B) all consumers lose by paying higher prices. 
C) some consumers gain and some lose, but as a group, consumers gain. 
D) some consumers gain and some lose, but as a group, consumers lose.

Question 3

All of the following are disadvantages of cost-plus pricing except

Accepted Answer

A) It ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price. 
B) If the industry comprises identical firms (with identical costs), markups could be consistent among firms leading to no one firm having a competitive edge in terms of price. 
C) Allocating and apportioning business overheads to individual products could be somewhat arbitrary. 
D) The business has less incentive to cut or control costs: if costs increase, then selling prices increase. Consequently, this might further erode a firm's competitiveness. 
A) It ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price. 
B) If the industry comprises identical firms (with identical costs), markups could be consistent among firms leading to no one firm having a competitive edge in terms of price. 
C) Allocating and apportioning business overheads to individual products could be somewhat arbitrary. 
D) The business has less incentive to cut or control costs: if costs increase, then selling prices increase. Consequently, this might further erode a firm's competitiveness.

Question 4

Differentiating products to suit customers' tastes is a form of price discrimination.

Accepted Answer

A) True 
 B)False

Question 5

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price.This practice is known as

Accepted Answer

A) first-degree exploitation, or perfect price discrimination. 
B) maximization of producer surplus, or perfect price discrimination. 
C) first-degree price discrimination, or perfect price discrimination. 
D) first-degree transfer of consumer surplus, or perfect price discrimination. 
A) first-degree exploitation, or perfect price discrimination. 
B) maximization of producer surplus, or perfect price discrimination. 
C) first-degree price discrimination, or perfect price discrimination. 
D) first-degree transfer of consumer surplus, or perfect price discrimination.

Question 6

Transactions costs refer to

Accepted Answer

A) the implicit costs of production. 
B) the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. 
C) the raw material cost of production. 
D) the cost of transporting goods from one destination to another. 
A) the implicit costs of production. 
B) the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. 
C) the raw material cost of production. 
D) the cost of transporting goods from one destination to another.

Question 7

There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.

Accepted Answer

A) True 
 B)False

Question 8

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Accepted Answer

A) True 
 B)False

Question 9

Compared to monopoly pricing, an optimal two-part tariff

Accepted Answer

A) reduces economic efficiency. 
B) eliminates the deadweight loss. 
C) equates marginal revenue and average revenue. 
D) increases consumer surplus. 
A) reduces economic efficiency. 
B) eliminates the deadweight loss. 
C) equates marginal revenue and average revenue. 
D) increases consumer surplus.

Question 10

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

Accepted Answer

A) clothing items sold through Macy's Department Store 
B) a hamburger sold at Burger King 
C) a cafe latte sold at Starbucks 
D) tickets to matinee shows at a movie theatre 
A) clothing items sold through Macy's Department Store 
B) a hamburger sold at Burger King 
C) a cafe latte sold at Starbucks 
D) tickets to matinee shows at a movie theatre

Question 11

Assume that a monopolist practices perfect price discrimination.The firm will produce an output

Accepted Answer

A) that is less than the efficient level of output. 
B) that is greater than the efficient level of output. 
C) that is equal to the efficient level of output. 
D) that converts consumers surplus into a deadweight loss. 
A) that is less than the efficient level of output. 
B) that is greater than the efficient level of output. 
C) that is equal to the efficient level of output. 
D) that converts consumers surplus into a deadweight loss.

Question 12

An article on how hotel prices rose during the solar eclipse on August 21, 2017 noted that in Hopkinsville, Kentucky: "At the local La Quinta Inn & Suites, prices are $425 a night, up from a $93 average on Google for the weekend before."
Source: David Gernon, "Once-in-a-lifetime solar eclipse is a bonanza for hotels, airlines," cnbc.com, July 27, 2017.
Which of the following statements is true?

Accepted Answer

A) The La Quinta Inn & Suites is practicing first-degree price discrimination by charging what the market will bear. 
B) This is evidence of third-degree price discrimination because hotel accommodation on a particular day is not a product that can be resold later. 
C) There is no evidence of price discrimination; the La Quinta Inn & Suites is responding to increased demand for hotel rooms in the face of constant supply. 
D) The La Quinta Inn & Suites has adopted this pricing strategy to capitalize on arbitrage profits. 
A) The La Quinta Inn & Suites is practicing first-degree price discrimination by charging what the market will bear. 
B) This is evidence of third-degree price discrimination because hotel accommodation on a particular day is not a product that can be resold later. 
C) There is no evidence of price discrimination; the La Quinta Inn & Suites is responding to increased demand for hotel rooms in the face of constant supply. 
D) The La Quinta Inn & Suites has adopted this pricing strategy to capitalize on arbitrage profits.

Question 13

Figure 16-1
  
-Refer to Figure 16-1.What is the consumer surplus received under perfect price discrimination?

Accepted Answer

A) the area under the demand curve above P₁ 
B) the area under the demand curve above P₃ 
C) the area under the demand curve above P₄ 
D) zero 
A) the area under the demand curve above P₁ 
B) the area under the demand curve above P₃ 
C) the area under the demand curve above P₄ 
D) zero

Question 14

Which of the following is not a requirement for a successful price discrimination strategy?

Accepted Answer

A) A firm must have the ability to charge a price greater than marginal cost. 
B) Some consumers must have a greater willingness to pay for the product than other consumers, and the firm must be able to know what prices consumers are willing to pay. 
C) The firm must be able to prevent arbitrage. 
D) Transactions costs must be the same for all consumers. 
A) A firm must have the ability to charge a price greater than marginal cost. 
B) Some consumers must have a greater willingness to pay for the product than other consumers, and the firm must be able to know what prices consumers are willing to pay. 
C) The firm must be able to prevent arbitrage. 
D) Transactions costs must be the same for all consumers.

Question 15

The antitrust law that prohibits price discrimination on grounds that it reduces competition is

Accepted Answer

A) the Clayton Act. 
B) the Federal Trade Commission Act. 
C) the Robinson-Patman Act. 
D) the Sherman Act. 
A) the Clayton Act. 
B) the Federal Trade Commission Act. 
C) the Robinson-Patman Act. 
D) the Sherman Act.

Question 16

Cost-plus pricing typically does not result in profit-maximization.As a result, economists have two views of cost-plus pricing.One of these views is

Accepted Answer

A) cost-plus pricing is more likely to lead to profit-maximization for large firms than for small firms. 
B) cost-plus pricing is a good way to approximate the profit-maximizing price when marginal revenue or marginal cost is difficult to determine. 
C) cost-plus pricing is more likely to lead to profit-maximization for monopolistically competitive firms than for oligopoly firms. 
D) cost-plus pricing is more likely to result in profit-maximization the more elastic the firm's demand curve is. 
A) cost-plus pricing is more likely to lead to profit-maximization for large firms than for small firms. 
B) cost-plus pricing is a good way to approximate the profit-maximizing price when marginal revenue or marginal cost is difficult to determine. 
C) cost-plus pricing is more likely to lead to profit-maximization for monopolistically competitive firms than for oligopoly firms. 
D) cost-plus pricing is more likely to result in profit-maximization the more elastic the firm's demand curve is.

Question 17

Book publishers often use price discrimination across time to increase profits.Toni Morrison's book, A Mercy, was published as a hardcover edition in November 2008 at a price of $23.95.In August 2009, the paperback version was published at a price of $15.00.Assume that 100,000 hardcover books were sold to hard-core Toni Morrison fans in November 2008, and 400,000 paperback books were sold to casual readers in August 2009.Illustrate each of these situations graphically.Assume that the marginal cost of the hardcover version is $2.00 and the marginal cost of the paperback version is $0.75.

Accepted Answer

The answer of Book publishers often use price discrimination across...

Question 18

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

Accepted Answer

A) odd pricing. 
B) dual pricing. 
C) a two-part tariff. 
D) intertemporal pricing. 
A) odd pricing. 
B) dual pricing. 
C) a two-part tariff. 
D) intertemporal pricing.

Question 19

Figure 16-6
   
Watanabe Sensei operates the only martial arts school in Hartfield. For simplicity, assume that consumers have identical demand curves and that Sensei knows what this demand curve is. Figure 16-6 shows this demand curve.
-Refer to Figure 16-6.If Sensei acts as a single-price monopolist and charges the profit-maximizing price, what is his producer surplus?

Accepted Answer

A) the area B + D + G 
B) the area A + B + C + D + H + G 
C) the area C + D + H + G 
D) the area A + C + H 
A) the area B + D + G 
B) the area A + B + C + D + H + G 
C) the area C + D + H + G 
D) the area A + C + H

Question 20

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

Accepted Answer

A) True 
 B)False

Yield management and price discrimination have enabled firms to increase profits and, at the same time,

When firms adopt successful dynamic pricing strategies, typically

All of the following are disadvantages of cost-plus pricing except

Differentiating products to suit customers' tastes is a form of price discrimination.

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price.This practice is known as

Transactions costs refer to

There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Compared to monopoly pricing, an optimal two-part tariff

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

Assume that a monopolist practices perfect price discrimination.The firm will produce an output

Figure 16-1 -Refer to Figure 16-1.What is the consumer surplus received under perfect price discrimination?

Which of the following is not a requirement for a successful price discrimination strategy?

The antitrust law that prohibits price discrimination on grounds that it reduces competition is

Cost-plus pricing typically does not result in profit-maximization.As a result, economists have two views of cost-plus pricing.One of these views is

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

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

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

Yield management and price discrimination have enabled firms to increase profits and, at the same time,

When firms adopt successful dynamic pricing strategies, typically

All of the following are disadvantages of cost-plus pricing except

Differentiating products to suit customers' tastes is a form of price discrimination.

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price.This practice is known as

Transactions costs refer to

There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Compared to monopoly pricing, an optimal two-part tariff

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

Assume that a monopolist practices perfect price discrimination.The firm will produce an output

Figure 16-1 -Refer to Figure 16-1.What is the consumer surplus received under perfect price discrimination?

Which of the following is not a requirement for a successful price discrimination strategy?

The antitrust law that prohibits price discrimination on grounds that it reduces competition is

Cost-plus pricing typically does not result in profit-maximization.As a result, economists have two views of cost-plus pricing.One of these views is

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

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

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