Question 1

Consumers who place a high value on a good are better off with pricing in the following order: 1)________; 2)________; 3)________.

Accepted Answer

A) competitive market; perfect price discrimination; single-price monopoly 
B) competitive market; single-price monopoly; perfect price discrimination 
C) single-price monopoly; competitive market; perfect price discrimination 
D) Unable to determine. 
A) competitive market; perfect price discrimination; single-price monopoly 
B) competitive market; single-price monopoly; perfect price discrimination 
C) single-price monopoly; competitive market; perfect price discrimination 
D) Unable to determine. B

Question 2

A consumer's reservation price is the

Accepted Answer

A) amount she will pay for a hotel or airline reservation. 
B) minimum amount she will pay for a good or service. 
C) price that maximizes her surplus. 
D) maximum amount she will pay for a good or service. 
A) amount she will pay for a hotel or airline reservation. 
B) minimum amount she will pay for a good or service. 
C) price that maximizes her surplus. 
D) maximum amount she will pay for a good or service. D

Question 3

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

Accepted Answer

A) The firm must have market power. 
B) The firm must be able to identify how its consumers' demand curves differ. 
C) The firm must be able to limit or prevent resale. 
D) All of the above. 
A) The firm must have market power. 
B) The firm must be able to identify how its consumers' demand curves differ. 
C) The firm must be able to limit or prevent resale. 
D) All of the above. D

Question 4

If a firm offers a senior citizen discount

Accepted Answer

A) the firm expects the average senior citizen to have a lower price elasticity of demand. 
B) the firm expects the average senior citizen to have a higher price elasticity of demand. 
C) senior citizens may be offended. 
D) it may be prosecuted for discrimination. 
A) the firm expects the average senior citizen to have a lower price elasticity of demand. 
B) the firm expects the average senior citizen to have a higher price elasticity of demand. 
C) senior citizens may be offended. 
D) it may be prosecuted for discrimination.

Question 5

With two-part pricing

Accepted Answer

A) the consumer puts down a deposit and then pays the rest when she picks up the goods purchased. 
B) the average price paid varies with the number of units purchased. 
C) the consumer is limited in the number of units that can be purchased. 
D) consumers are required to buy two units of a good. 
A) the consumer puts down a deposit and then pays the rest when she picks up the goods purchased. 
B) the average price paid varies with the number of units purchased. 
C) the consumer is limited in the number of units that can be purchased. 
D) consumers are required to buy two units of a good.

Question 6

In two-part pricing with identical consumers, a firm at least

Accepted Answer

A) charges a lump-sum fee equal to the producer surplus. 
B) sets unit price equal to marginal cost. 
C) cannot maximize profit compared to single-price monopoly pricing. 
D) Both A and B. 
A) charges a lump-sum fee equal to the producer surplus. 
B) sets unit price equal to marginal cost. 
C) cannot maximize profit compared to single-price monopoly pricing. 
D) Both A and B.

Question 7

Which of the following is an example of bundling?

Accepted Answer

A) a pair of pants 
B) a pizza and beer lunch combo 
C) a bicycle 
D) All of the above. 
A) a pair of pants 
B) a pizza and beer lunch combo 
C) a bicycle 
D) All of the above.

Question 8

Relative to a single-price monopoly, the effect of group price discrimination on social welfare is

Accepted Answer

A) beneficial. 
B) detrimental. 
C) neutral. 
D) ambiguous. 
A) beneficial. 
B) detrimental. 
C) neutral. 
D) ambiguous.

Question 9

The deadweight loss generated by a perfect-price-discriminating monopoly

Accepted Answer

A) equals the deadweight loss of a single-price monopoly. 
B) is greater than the deadweight loss of a single-price monopoly. 
C) equals zero. 
D) equals the sum of all lost consumer surplus. 
A) equals the deadweight loss of a single-price monopoly. 
B) is greater than the deadweight loss of a single-price monopoly. 
C) equals zero. 
D) equals the sum of all lost consumer surplus.

Question 10

At the current price of a good Al's consumer surplus equals 15 and Ben's consumer surplus equals 15. By using two-part pricing a monopolist could increase his profit by

Accepted Answer

A) 8. 
B) 16. 
C) 15. 
D) 30. 
A) 8. 
B) 16. 
C) 15. 
D) 30.

Question 11

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

Accepted Answer

A) identify customers with apparently more elastic demand and offer them a lower price. 
B) retain loyal customers who are not price sensitive. 
C) offer discounts to consumers who buy larger quantities. 
D) perfectly price discriminate. 
A) identify customers with apparently more elastic demand and offer them a lower price. 
B) retain loyal customers who are not price sensitive. 
C) offer discounts to consumers who buy larger quantities. 
D) perfectly price discriminate.

Question 12

If a firm is to capture all consumer surplus with two-part pricing when customers are different

Accepted Answer

A) it must be able to charge different access fees. 
B) it cannot charge different prices for access fees. 
C) it must set unit price below marginal cost. 
D) it must set unit price above marginal cost. 
A) it must be able to charge different access fees. 
B) it cannot charge different prices for access fees. 
C) it must set unit price below marginal cost. 
D) it must set unit price above marginal cost.

Question 13

-The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, producer surplus equals

Accepted Answer

A) A + B + C + D + E. 
B) D + E. 
C) E. 
D) zero. 
A) A + B + C + D + E. 
B) D + E. 
C) E. 
D) zero.

Question 14

Explain using welfare measures whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly.

Accepted Answer

Consumers prefer a single pric

Question 15

A firm that holds a monopoly in both goods stands to gain from a tie-in sale.

Accepted Answer

A) True. 
B) False. 
C) True, which is why anti-trust laws exist. 
D) False, there are no dual monopolies. 
A) True. 
B) False. 
C) True, which is why anti-trust laws exist. 
D) False, there are no dual monopolies.

Question 16

Resale is difficult when

Accepted Answer

A) the good is light-weight. 
B) the good is expensive. 
C) transaction costs are high. 
D) transaction costs are negligible. 
A) the good is light-weight. 
B) the good is expensive. 
C) transaction costs are high. 
D) transaction costs are negligible.

Question 17

Firms can only use one form of price discrimination.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

Accepted Answer

A) The firm must be able to identify individual or groups of consumers with different demand curves. 
B) The firm must be able to identify how its consumers' demand curves differ. 
C) The good cannot be easily resold. 
D) All of the above. 
A) The firm must be able to identify individual or groups of consumers with different demand curves. 
B) The firm must be able to identify how its consumers' demand curves differ. 
C) The good cannot be easily resold. 
D) All of the above.

Question 19

A weapons producer sells guns to two countries that are at war with each other. The guns can be produced at a constant marginal cost of $10. The demand for guns from the two countries can be represented as:
QA = 100 - 2p
QB = 80 - 4p
Why is the weapons producer able to price discriminate?
What price will it charge to each country?

Accepted Answer

The firm can price discriminate because

Question 20

If people posing as a vacationers were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers

Accepted Answer

A) group price discrimination on the part of airlines would no longer be profitable. 
B) group price discrimination on the part of airlines would no longer be profit maximizing. 
C) the airlines would respond by raising further the price charged to business flyers. 
D) the people reselling would not earn any economic profit. 
A) group price discrimination on the part of airlines would no longer be profitable. 
B) group price discrimination on the part of airlines would no longer be profit maximizing. 
C) the airlines would respond by raising further the price charged to business flyers. 
D) the people reselling would not earn any economic profit.

Consumers who place a high value on a good are better off with pricing in the following order: 1); 2); 3).

A consumer's reservation price is the

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

If a firm offers a senior citizen discount

With two-part pricing

In two-part pricing with identical consumers, a firm at least

Which of the following is an example of bundling?

Relative to a single-price monopoly, the effect of group price discrimination on social welfare is

The deadweight loss generated by a perfect-price-discriminating monopoly

At the current price of a good Al's consumer surplus equals 15 and Ben's consumer surplus equals 15. By using two-part pricing a monopolist could increase his profit by

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

If a firm is to capture all consumer surplus with two-part pricing when customers are different

-The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, producer surplus equals

Explain using welfare measures whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly.

A firm that holds a monopoly in both goods stands to gain from a tie-in sale.

Resale is difficult when

Firms can only use one form of price discrimination.

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

If people posing as a vacationers were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 10: Pricing With Market Power

Consumers who place a high value on a good are better off with pricing in the following order: 1)________; 2)________; 3)________.

A consumer's reservation price is the

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

If a firm offers a senior citizen discount

With two-part pricing

In two-part pricing with identical consumers, a firm at least

Which of the following is an example of bundling?

Relative to a single-price monopoly, the effect of group price discrimination on social welfare is

The deadweight loss generated by a perfect-price-discriminating monopoly

At the current price of a good Al's consumer surplus equals 15 and Ben's consumer surplus equals 15. By using two-part pricing a monopolist could increase his profit by

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

If a firm is to capture all consumer surplus with two-part pricing when customers are different

-The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, producer surplus equals

Explain using welfare measures whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly.

A firm that holds a monopoly in both goods stands to gain from a tie-in sale.

Resale is difficult when

Firms can only use one form of price discrimination.

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

If people posing as a vacationers were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Consumers who place a high value on a good are better off with pricing in the following order: 1); 2); 3).