Question 1

The term "early adopters" refers to

Accepted Answer

A) firms that are the first to implement a new technology that is used to produce new goods or services. 
B) book clubs that are first to recommend best-selling books to their members. 
C) consumers who respond quickly to fads, seasonal changes, etc. 
D) consumers who are willing to pay high prices to be among the first to own new products. 
A) firms that are the first to implement a new technology that is used to produce new goods or services. 
B) book clubs that are first to recommend best-selling books to their members. 
C) consumers who respond quickly to fads, seasonal changes, etc. 
D) consumers who are willing to pay high prices to be among the first to own new products.

Question 2

Why might a producer practice price discrimination?

Accepted Answer

A) to make its products more affordable to those with low incomes 
B) to maximize economic efficiency 
C) to maximize profits 
D) to maximize quantity demanded 
A) to make its products more affordable to those with low incomes 
B) to maximize economic efficiency 
C) to maximize profits 
D) to maximize quantity demanded

Question 3

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 4

To successfully price discriminate, a firm must ensure that there are no opportunities for arbitrage.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements about perfect price discrimination is false?

Accepted Answer

A) There is no consumer surplus if a firm engages in perfect price discrimination. 
B) Perfect price discrimination occurs when the seller charges the highest price each consumer would be willing to pay for the product. 
C) A condition for perfect price discrimination is that it must be costlier to service some customers than others. 
D) For the price-discriminating firm, its marginal revenue curve coincides with its demand curve. 
A) There is no consumer surplus if a firm engages in perfect price discrimination. 
B) Perfect price discrimination occurs when the seller charges the highest price each consumer would be willing to pay for the product. 
C) A condition for perfect price discrimination is that it must be costlier to service some customers than others. 
D) For the price-discriminating firm, its marginal revenue curve coincides with its demand curve.

Question 6

Which of the following antitrust laws forbade firms to engage in price discrimination if the effect would lessen competition or create a monopoly?

Accepted Answer

A) the Sherman Act 
B) the Clayton Act 
C) the Robinson-Patman Act 
D) the Cellar-Kefauver Act 
A) the Sherman Act 
B) the Clayton Act 
C) the Robinson-Patman Act 
D) the Cellar-Kefauver Act

Question 7

Which of the following are necessary conditions for successful price discrimination?
A.zero transactions costs
B.a perfectly competitive market structure
C.an imperfectly competitive market structure
D.at least two different markets with different price elasticities of demand
E.at least two different markets with different price elasticities of supply

Accepted Answer

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

Question 8

The law of one price

Accepted Answer

A) states that consumers can only buy one good or service at a time. 
B) is a law passed by Congress that prohibits firms from selling a product at two different prices in the same market at the same time. 
C) states that consumers will pay any price for a product that has a perfectly inelastic demand curve. 
D) states that identical products should sell for the same price everywhere. 
A) states that consumers can only buy one good or service at a time. 
B) is a law passed by Congress that prohibits firms from selling a product at two different prices in the same market at the same time. 
C) states that consumers will pay any price for a product that has a perfectly inelastic demand curve. 
D) states that identical products should sell for the same price everywhere.

Question 9

Figure 16-2
   
Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population.Figure 16-2 shows the demand curves for the two groups of customers.
-Refer to Figure 16-2.Suppose Plato Playhouse charges a single price of Pd for each performance.Which of the following statements is true?

Accepted Answer

A) The company is selling more than the profit-maximizing quantity in the non-student market and less than the profit-maximizing quantity in the student market. 
B) The company is selling less than the profit-maximizing quantity in the non-student market and more than the profit-maximizing quantity in the student market. 
C) The company is selling less than the profit-maximizing quantity in both markets but it is maximizing its revenue. 
D) The company is selling less than the profit-maximizing quantity in both markets. 
A) The company is selling more than the profit-maximizing quantity in the non-student market and less than the profit-maximizing quantity in the student market. 
B) The company is selling less than the profit-maximizing quantity in the non-student market and more than the profit-maximizing quantity in the student market. 
C) The company is selling less than the profit-maximizing quantity in both markets but it is maximizing its revenue. 
D) The company is selling less than the profit-maximizing quantity in both markets.

Question 10

An optimal two-part tariff pricing schedule maximizes consumer surplus.

Accepted Answer

A) True 
 B)False

Question 11

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 price it will charge?

Accepted Answer

A) It should charge a range of prices from $40 to $16. 
B) It should charge a range of prices from $40 to $12. 
C) $2 
D) $8 
A) It should charge a range of prices from $40 to $16. 
B) It should charge a range of prices from $40 to $12. 
C) $2 
D) $8

Question 12

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 13

Assume that a monopolist practices perfect price discrimination.The firm's marginal revenue curve will

Accepted Answer

A) be perfectly elastic. 
B) be equal to its demand curve. 
C) be perfectly inelastic. 
D) lie below its demand curve. 
A) be perfectly elastic. 
B) be equal to its demand curve. 
C) be perfectly inelastic. 
D) lie below its demand curve.

Question 14

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 price of cocktails 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.
Which scheme will earn the largest profit?

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 15

What is odd pricing? Why do some merchants use odd pricing?

Accepted Answer

Odd pricing is the practice of charging

Question 16

If, at the firm's projected sales level, the marginal cost is $40, the average cost is $50 and the markup is 30 percent, then its selling price is

Accepted Answer

A) $40. 
B) $50. 
C) $52. 
D) $65. 
A) $40. 
B) $50. 
C) $52. 
D) $65.

Question 17

The law of one price states

Accepted Answer

A) federal and state statutes that prohibit price discrimination. 
B) that all customers should pay the same price. 
C) that identical products should sell for the same price everywhere. 
D) government regulation of prices for all firms. 
A) federal and state statutes that prohibit price discrimination. 
B) that all customers should pay the same price. 
C) that identical products should sell for the same price everywhere. 
D) government regulation of prices for all firms.

Question 18

Figure 16-2
   
Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population.Figure 16-2 shows the demand curves for the two groups of customers.
-Refer to Figure 16-2.Suppose Plato Playhouse price discriminates.Which of the following statements is true?

Accepted Answer

A) By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby increasing economic efficiency. 
B) By charging two different prices, the theatre company essentially allows those willing to pay higher prices to subsidize those who are not. 
C) By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby improving equity. 
D) Plato Playhouse will earn higher profits if it charges a single price - an average of the two prices - instead of charging two different prices to the two different groups of customers. 
A) By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby increasing economic efficiency. 
B) By charging two different prices, the theatre company essentially allows those willing to pay higher prices to subsidize those who are not. 
C) By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby improving equity. 
D) Plato Playhouse will earn higher profits if it charges a single price - an average of the two prices - instead of charging two different prices to the two different groups of customers.

Question 19

Figure 16-3
   
Chantal owns a hairdressing salon which caters to two main groups of customers: residents of "The Chateau," a retirement community, and other residents in the neighborhood.Figure 16-3 shows the demand curves for the residents of the retirement community, labeled Market A, and other residents in the neighborhood, labeled Market B.The demand curves are not identical.
-Refer to Figure 16-3.What prices are charged in the two markets?

Accepted Answer

A) price in market A = price in market B = $15 
B) price in market A = $10; price in market B = $15 
C) price in market A = price in market B = $5 
D) price in market A = price in market B = $10 
A) price in market A = price in market B = $15 
B) price in market A = $10; price in market B = $15 
C) price in market A = price in market B = $5 
D) price in market A = price in market B = $10

Question 20

Cost-plus pricing is a reasonable way to determine the optimal price when

Accepted Answer

A) marginal cost and average cost are roughly equal. 
B) fixed cost and variable costs are roughly equal. 
C) fixed costs vary. 
D) fixed costs are high. 
A) marginal cost and average cost are roughly equal. 
B) fixed cost and variable costs are roughly equal. 
C) fixed costs vary. 
D) fixed costs are high.

The term "early adopters" refers to

Why might a producer practice price discrimination?

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

To successfully price discriminate, a firm must ensure that there are no opportunities for arbitrage.

Which of the following statements about perfect price discrimination is false?

Which of the following antitrust laws forbade firms to engage in price discrimination if the effect would lessen competition or create a monopoly?

The law of one price

An optimal two-part tariff pricing schedule maximizes consumer surplus.

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 price it will charge?

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

Assume that a monopolist practices perfect price discrimination.The firm's marginal revenue curve will

What is odd pricing? Why do some merchants use odd pricing?

If, at the firm's projected sales level, the marginal cost is $40, the average cost is $50 and the markup is 30 percent, then its selling price is

The law of one price states

Cost-plus pricing is a reasonable way to determine the optimal price when

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 More Realistic Setting

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

Exam 16: Pricing Strategy

The term "early adopters" refers to

Why might a producer practice price discrimination?

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

To successfully price discriminate, a firm must ensure that there are no opportunities for arbitrage.

Which of the following statements about perfect price discrimination is false?

Which of the following antitrust laws forbade firms to engage in price discrimination if the effect would lessen competition or create a monopoly?

The law of one price

An optimal two-part tariff pricing schedule maximizes consumer surplus.

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 price it will charge?

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

Assume that a monopolist practices perfect price discrimination.The firm's marginal revenue curve will

What is odd pricing? Why do some merchants use odd pricing?

If, at the firm's projected sales level, the marginal cost is $40, the average cost is $50 and the markup is 30 percent, then its selling price is

The law of one price states

Cost-plus pricing is a reasonable way to determine the optimal price when

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 More Realistic Setting

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