Question 1

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Accepted Answer

A) yield management. 
B) elasticity management. 
C) brand management. 
D) marketing. 
A) yield management. 
B) elasticity management. 
C) brand management. 
D) marketing.

Question 2

Bubba's Hula Shack Bar and Bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill.This is an example of

Accepted Answer

A) arbitrage. 
B) two-part tariff pricing. 
C) price discrimination. 
D) odd pricing. 
A) arbitrage. 
B) two-part tariff pricing. 
C) price discrimination. 
D) odd pricing.

Question 3

Toot Sweets Bakery sells freshly baked muffins from 6.30 am at $1.20 per muffin.By 4 pm, the remaining muffins are marked down to $0.60 each.Which of the following statements is true?

Accepted Answer

A) Toot Sweets engages in price discrimination; a higher price for those who cannot wait and a lower price for those willing to wait until 4 pm. 
B) Toot Sweets is trying to prevent the opportunity to make arbitrage profit. 
C) Toot Sweets is not engaging in price discrimination because the product could be resold by customers. 
D) Toot Sweets has underestimated the demand for its muffins. 
A) Toot Sweets engages in price discrimination; a higher price for those who cannot wait and a lower price for those willing to wait until 4 pm. 
B) Toot Sweets is trying to prevent the opportunity to make arbitrage profit. 
C) Toot Sweets is not engaging in price discrimination because the product could be resold by customers. 
D) Toot Sweets has underestimated the demand for its muffins.

Question 4

When firms price their products by adding a percentage markup to their average costs of production, this is called

Accepted Answer

A) average cost pricing. 
B) rounding up. 
C) break-even pricing. 
D) cost-plus pricing. 
A) average cost pricing. 
B) rounding up. 
C) break-even pricing. 
D) cost-plus pricing.

Question 5

Table 16-3
   
Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a portion of her survey results.
-Refer to Table 16-3.If Julie charges $10 per hour, how many hours of pet sitting services will be purchased and by whom?

Accepted Answer

A) 2 hours (1 hour by Cara and 1 hour by Dawn) 
B) 1 hour by Cara only 
C) 1 hour by Dawn only 
D) 3 hours (1 hour each by Arun, Bernice, and Cara) 
A) 2 hours (1 hour by Cara and 1 hour by Dawn) 
B) 1 hour by Cara only 
C) 1 hour by Dawn only 
D) 3 hours (1 hour each by Arun, Bernice, and Cara)

Question 6

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Accepted Answer

A) the firm must set different prices for different regions where the product is sold. 
B) the firm must be willing to offer price discounts for senior citizens and children. 
C) the firm must be able to divide the market in a way that makes arbitrage impossible. 
D) the firm must choose a marketing strategy that appeals to different segments of the economy. 
A) the firm must set different prices for different regions where the product is sold. 
B) the firm must be willing to offer price discounts for senior citizens and children. 
C) the firm must be able to divide the market in a way that makes arbitrage impossible. 
D) the firm must choose a marketing strategy that appeals to different segments of the economy.

Question 7

Figure 16-5
  
-Refer to Figure 16-5.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 8

Consider three pricing strategies that the firm can pursue:
A.optimal two-part tariff pricing
B.perfect price discrimination
C.single-price monopoly pricing
Of these three strategies, which method gives the firm the highest profit?

Accepted Answer

A) optimal two-part tariff pricing 
B) perfect price discrimination 
C) single-price monopoly pricing 
D) The profit is the same under optimal two-part tariff pricing and perfect price discrimination, and the profit is higher than under single-price monopoly pricing. 
A) optimal two-part tariff pricing 
B) perfect price discrimination 
C) single-price monopoly pricing 
D) The profit is the same under optimal two-part tariff pricing and perfect price discrimination, and the profit is higher than under single-price monopoly pricing.

Question 9

Consider the following actions undertaken by a firm:
A.charging a higher price for products of higher quality
B.charging different prices to different consumers for the same product when the variation cannot be explained by cost differences
C.charging different prices for products of different qualities
D.charging a lower price to match a competitor's price
Which of the above will be considered price discrimination?

Accepted Answer

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

Question 10

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

Accepted Answer

A) True 
 B)False

Question 11

A price-discriminating firm charges the highest price to

Accepted Answer

A) the group with the largest demand. 
B) the group with the most elastic demand. 
C) the group with the least elastic demand. 
D) the group with demand that is unit elastic. 
A) the group with the largest demand. 
B) the group with the most elastic demand. 
C) the group with the least elastic demand. 
D) the group with demand that is unit elastic.

Question 12

If firms differentiate their products in different ways and charge different price because of these differentiation factors, then

Accepted Answer

A) the law of one price is not violated. 
B) transactions costs are being ignored. 
C) the firm must not be maximizing profit. 
D) demand must be perfectly elastic. 
A) the law of one price is not violated. 
B) transactions costs are being ignored. 
C) the firm must not be maximizing profit. 
D) demand must be perfectly elastic.

Question 13

What is meant by the "law of one price"? In discussing the law of demand, Hubbard and O'Brien claim there has been only one example found of an exception to the law (that is, evidence of an upward-sloping demand curve).Are there exceptions to the law of one price?

Accepted Answer

The law of one price states that identic

Question 14

Which of the following is not an advantage of cost-plus pricing?

Accepted Answer

A) It is easy to calculate. 
B) It requires little information. 
C) If a firm is selling multiple products, it ensures that the firm's prices will cover costs that are difficult to assign to one product. 
D) It ensures that the firm will maximize its profits. 
A) It is easy to calculate. 
B) It requires little information. 
C) If a firm is selling multiple products, it ensures that the firm's prices will cover costs that are difficult to assign to one product. 
D) It ensures that the firm will maximize its profits.

Question 15

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

Accepted Answer

A) examples of zero-sum games, since the value of the goods sold is exactly equal to the prices paid for them. 
B) unproductive since the goods sold have been produced in the past. 
C) examples of exploitation of buyers of the goods by the sellers. 
D) examples of arbitrage. 
A) examples of zero-sum games, since the value of the goods sold is exactly equal to the prices paid for them. 
B) unproductive since the goods sold have been produced in the past. 
C) examples of exploitation of buyers of the goods by the sellers. 
D) examples of arbitrage.

Question 16

The Walt Disney Company uses cost-plus pricing to determine the prices it charges for admission and rides at Disneyland and Walt Disney World.

Accepted Answer

A) True 
 B)False

Question 17

Why is price discrimination legal but not discrimination based on race or gender?

Accepted Answer

A) because price discrimination increases profits and therefore tax revenues for the government, but discrimination based on race or gender reduces tax revenues 
B) because price discrimination reduces deadweight loss, but discrimination based on race or gender increases deadweight loss 
C) because price discrimination involves charging people different prices based on their willingness to pay rather than on the basis of arbitrary characteristics 
D) because price discrimination enables firms to increase output and employment, but race- or gender-based discrimination reduces employment 
A) because price discrimination increases profits and therefore tax revenues for the government, but discrimination based on race or gender reduces tax revenues 
B) because price discrimination reduces deadweight loss, but discrimination based on race or gender increases deadweight loss 
C) because price discrimination involves charging people different prices based on their willingness to pay rather than on the basis of arbitrary characteristics 
D) because price discrimination enables firms to increase output and employment, but race- or gender-based discrimination reduces employment

Question 18

In a perfectly competitive market, in the long run, arbitrage profits will be bid away.

Accepted Answer

A) True 
 B)False

Question 19

Table 16-2
   
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.How many tubes of toothpaste will Neem sell in Middle Fall and at what price?

Accepted Answer

A) Q = 2 units; P = $7 
B) Q = 3 units; P = $6 
C) Q = 4 units; P = $5 
D) Q = 5 units; P = $4 
A) Q = 2 units; P = $7 
B) Q = 3 units; P = $6 
C) Q = 4 units; P = $5 
D) Q = 5 units; P = $4

Question 20

Many golf courses charge members an annual membership fee as well as a fee each time they golf.One reason for this is

Accepted Answer

A) golf courses do not want their members to overuse their fairways. Charging for each round of golf played reduces fairway maintenance costs. 
B) charging both fees allows the courses to transfer more consumer surplus into profit than charging only a fee per round of golf. 
C) charging both fees allows the courses to transfer more producer surplus into profit than charging only a fee per round of golf. 
D) research has shown that charging both fees increases the likelihood that golfers will renew their memberships. 
A) golf courses do not want their members to overuse their fairways. Charging for each round of golf played reduces fairway maintenance costs. 
B) charging both fees allows the courses to transfer more consumer surplus into profit than charging only a fee per round of golf. 
C) charging both fees allows the courses to transfer more producer surplus into profit than charging only a fee per round of golf. 
D) research has shown that charging both fees increases the likelihood that golfers will renew their memberships.

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Bubba's Hula Shack Bar and Bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill.This is an example of

Toot Sweets Bakery sells freshly baked muffins from 6.30 am at $1.20 per muffin.By 4 pm, the remaining muffins are marked down to $0.60 each.Which of the following statements is true?

When firms price their products by adding a percentage markup to their average costs of production, this is called

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Figure 16-5 -Refer to Figure 16-5.Suppose the firm represented in the diagram decides to practice perfect price discrimination.What is the profit-maximizing quantity?

Consider three pricing strategies that the firm can pursue: A.optimal two-part tariff pricing B.perfect price discrimination C.single-price monopoly pricing Of these three strategies, which method gives the firm the highest profit?

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

A price-discriminating firm charges the highest price to

If firms differentiate their products in different ways and charge different price because of these differentiation factors, then

What is meant by the "law of one price"? In discussing the law of demand, Hubbard and O'Brien claim there has been only one example found of an exception to the law (that is, evidence of an upward-sloping demand curve).Are there exceptions to the law of one price?

Which of the following is not an advantage of cost-plus pricing?

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

The Walt Disney Company uses cost-plus pricing to determine the prices it charges for admission and rides at Disneyland and Walt Disney World.

Why is price discrimination legal but not discrimination based on race or gender?

In a perfectly competitive market, in the long run, arbitrage profits will be bid away.

Table 16-2 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.How many tubes of toothpaste will Neem sell in Middle Fall and at what price?

Many golf courses charge members an annual membership fee as well as a fee each time they golf.One reason for this is

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

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Bubba's Hula Shack Bar and Bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill.This is an example of

Toot Sweets Bakery sells freshly baked muffins from 6.30 am at $1.20 per muffin.By 4 pm, the remaining muffins are marked down to $0.60 each.Which of the following statements is true?

When firms price their products by adding a percentage markup to their average costs of production, this is called

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Figure 16-5 -Refer to Figure 16-5.Suppose the firm represented in the diagram decides to practice perfect price discrimination.What is the profit-maximizing quantity?

Consider three pricing strategies that the firm can pursue: A.optimal two-part tariff pricing B.perfect price discrimination C.single-price monopoly pricing Of these three strategies, which method gives the firm the highest profit?

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

A price-discriminating firm charges the highest price to

If firms differentiate their products in different ways and charge different price because of these differentiation factors, then

What is meant by the "law of one price"? In discussing the law of demand, Hubbard and O'Brien claim there has been only one example found of an exception to the law (that is, evidence of an upward-sloping demand curve).Are there exceptions to the law of one price?

Which of the following is not an advantage of cost-plus pricing?

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

The Walt Disney Company uses cost-plus pricing to determine the prices it charges for admission and rides at Disneyland and Walt Disney World.

Why is price discrimination legal but not discrimination based on race or gender?

In a perfectly competitive market, in the long run, arbitrage profits will be bid away.

Table 16-2 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.How many tubes of toothpaste will Neem sell in Middle Fall and at what price?

Many golf courses charge members an annual membership fee as well as a fee each time they golf.One reason for this is

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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