Question 1

If a firm sells to two distinct identifiable markets and resale is impossible, why is price discrimination more profitable than setting a single price?

Accepted Answer

If the firm charges a single price on th

Question 2

Purchasing a season pass to the local symphony

Accepted Answer

A) is an example of first degree price discrimination. 
B) is an example of second degree price discrimination. 
C) is an example of third degree price discrimination. 
D) All of the above. 
A) is an example of first degree price discrimination. 
B) is an example of second degree price discrimination. 
C) is an example of third degree price discrimination. 
D) All of the above.

Question 3

Which of the following is an example for group price discrimination?

Accepted Answer

A) a BMW selling for more than a VW 
B) local residents receiving a discount at the local golf course 
C) the fact that a razor is cheap and blades are expensive 
D) a hotel charging more for a room if the customers bring pets 
A) a BMW selling for more than a VW 
B) local residents receiving a discount at the local golf course 
C) the fact that a razor is cheap and blades are expensive 
D) a hotel charging more for a room if the customers bring pets

Question 4

A firm that practices group price discrimination will set the lower price in the market that has the most elastic demand.

Accepted Answer

A) True 
 B)False

Question 5

When firms price discriminate they

Accepted Answer

A) sell to new consumers who would not have bought at the profit-maximizing uniform price but lose sales to existing consumers because of the higher prices. 
B) sell to new consumers that would not have bought at the profit-maximizing uniform price. 
C) lose surplus from consumers who would have bought at the profit-maximizing uniform price. 
D) None of the above. 
A) sell to new consumers who would not have bought at the profit-maximizing uniform price but lose sales to existing consumers because of the higher prices. 
B) sell to new consumers that would not have bought at the profit-maximizing uniform price. 
C) lose surplus from consumers who would have bought at the profit-maximizing uniform price. 
D) None of the above.

Question 6

Suppose a profit-maximizing monopoly is able to employ group price discrimination. The marginal cost of providing the good is constant and the same in both markets. The marginal revenue the firm earns on the last unit sold in the market with the lower price will be

Accepted Answer

A) greater than the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
B) less than the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
C) equal to the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
D) greater than the marginal cost of the last unit. 
A) greater than the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
B) less than the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
C) equal to the marginal revenue the firm earns on the last unit sold in the market with the higher price. 
D) greater than the marginal cost of the last unit.

Question 7

A perfect price discriminator

Accepted Answer

A) charges each buyer her reservation price. 
B) charges different prices to each customer based upon different costs of delivery. 
C) generates a deadweight loss to society. 
D) charges lower prices to customers who buy greater quantities. 
A) charges each buyer her reservation price. 
B) charges different prices to each customer based upon different costs of delivery. 
C) generates a deadweight loss to society. 
D) charges lower prices to customers who buy greater quantities.

Question 8

What is one reason suppliers might offer a discount for quantity purchases?

Accepted Answer

A) reduced storage costs 
B) lower marginal cost 
C) lower marginal benefit 
D) price gouging 
A) reduced storage costs 
B) lower marginal cost 
C) lower marginal benefit 
D) price gouging

Question 9

A firm engaging in group price discrimination

Accepted Answer

A) divides customers into groups and then charges each customer within each group a different price, similar to perfect price discrimination. 
B) divides customers into groups and then charges each group a different price. 
C) bundles products into groups and sells the groups at different prices. 
D) finds the average reservation price for a group of customers and sell its goods at that price. 
A) divides customers into groups and then charges each customer within each group a different price, similar to perfect price discrimination. 
B) divides customers into groups and then charges each group a different price. 
C) bundles products into groups and sells the groups at different prices. 
D) finds the average reservation price for a group of customers and sell its goods at that price.

Question 10

Group price discrimination results in social welfare that ________ under a single-price monopoly.

Accepted Answer

A) is greater than 
B) is lower than 
C) is the same as 
D) might be greater or might be lower than 
A) is greater than 
B) is lower than 
C) is the same as 
D) might be greater or might be lower than

Question 11

If the price of business broadband is greater than that of residential broadband, all else equal

Accepted Answer

A) business has greater price elasticity than residential. 
B) residential has greater price elasticity than business. 
C) both have inelastic demand curves. 
D) generally speaking, broadband is equally priced. 
A) business has greater price elasticity than residential. 
B) residential has greater price elasticity than business. 
C) both have inelastic demand curves. 
D) generally speaking, broadband is equally priced.

Question 12

A group price discriminator sells its product in Florida for three times the price it sets in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0, the demand in Florida

Accepted Answer

A) has an elasticity of -6.0. 
B) is more price elastic than the demand in New York. 
C) has an elasticity of -1.2. 
D) has an elasticity of -0.67. 
A) has an elasticity of -6.0. 
B) is more price elastic than the demand in New York. 
C) has an elasticity of -1.2. 
D) has an elasticity of -0.67.

Question 13

Firms are better off using rebates rather than just lowering the price of a good because

Accepted Answer

A) people view the firm in a positive light because now poorer people will be able to afford their good. 
B) customers overestimate the value of the rebate and so buy more of the good, making profits higher than if they just lowered the price. 
C) only those who place a low value on their time or are price sensitive actually redeem the rebate, making profits higher than if they just lowered the price. 
D) lowering the price is inefficient and creates additional deadweight loss. 
A) people view the firm in a positive light because now poorer people will be able to afford their good. 
B) customers overestimate the value of the rebate and so buy more of the good, making profits higher than if they just lowered the price. 
C) only those who place a low value on their time or are price sensitive actually redeem the rebate, making profits higher than if they just lowered the price. 
D) lowering the price is inefficient and creates additional deadweight loss.

Question 14

Two-part pricing allows the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Accepted Answer

A) True 
 B)False

Question 15

Each identical consumer has the following demand for golf, q = 100 - p, where q is the number of rounds of golf played per year and p is the price per round. The only golf course in an isolated town incurs a marginal cost of $10 per round of golf. It wishes to charge a membership fee and a fee per round of golf. What price will it set for each fee?

Accepted Answer

At a price of $10, consumer su

Question 16

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

Accepted Answer

A) because the demands for these two goods are positively correlated 
B) because the demands for these two goods are negatively correlated 
C) because the demands for these two goods are independent 
D) It violates the Clean Food Act of 1908. 
A) because the demands for these two goods are positively correlated 
B) because the demands for these two goods are negatively correlated 
C) because the demands for these two goods are independent 
D) It violates the Clean Food Act of 1908.

Question 17

A perfect price discriminating equilibrium maximizes

Accepted Answer

A) consumer surplus. 
B) the associated deadweight loss. 
C) the market inefficiency. 
D) total welfare. 
A) consumer surplus. 
B) the associated deadweight loss. 
C) the market inefficiency. 
D) total welfare.

Question 18

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. If the marginal cost of installing carpet is a constant $1 per sq yard, what price does Bob charge each segment?

Accepted Answer

A) $1 in each market 
B) $5.50 in the residential market and $8 in the business market 
C) $1 in the residential market and $5 in the business market 
D) $10 in the residential market and $15 in the business market 
A) $1 in each market 
B) $5.50 in the residential market and $8 in the business market 
C) $1 in the residential market and $5 in the business market 
D) $10 in the residential market and $15 in the business market

Question 19

Why doesn't a firm price discriminate based on income levels?

Accepted Answer

A) It would be nearly impossible to conveniently confirm any individual's income level. 
B) It is illegal to ask someone their income levels. 
C) It is immoral to price discriminate based on income levels. 
D) They do: It is common practice for firms to price discriminate based on income. 
A) It would be nearly impossible to conveniently confirm any individual's income level. 
B) It is illegal to ask someone their income levels. 
C) It is immoral to price discriminate based on income levels. 
D) They do: It is common practice for firms to price discriminate based on income.

Question 20

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market ________, whereas in perfect price discrimination ________.

Accepted Answer

A) all units are sold where p = MC; only the last unit sold is at p = MC 
B) consumers receive some surplus; producers take all the surplus 
C) consumers are better off; income is redistributed away from consumers to producers 
D) All of the above. 
A) all units are sold where p = MC; only the last unit sold is at p = MC 
B) consumers receive some surplus; producers take all the surplus 
C) consumers are better off; income is redistributed away from consumers to producers 
D) All of the above.

If a firm sells to two distinct identifiable markets and resale is impossible, why is price discrimination more profitable than setting a single price?

Purchasing a season pass to the local symphony

Which of the following is an example for group price discrimination?

A firm that practices group price discrimination will set the lower price in the market that has the most elastic demand.

When firms price discriminate they

Suppose a profit-maximizing monopoly is able to employ group price discrimination. The marginal cost of providing the good is constant and the same in both markets. The marginal revenue the firm earns on the last unit sold in the market with the lower price will be

A perfect price discriminator

What is one reason suppliers might offer a discount for quantity purchases?

A firm engaging in group price discrimination

Group price discrimination results in social welfare that ________ under a single-price monopoly.

If the price of business broadband is greater than that of residential broadband, all else equal

A group price discriminator sells its product in Florida for three times the price it sets in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0, the demand in Florida

Firms are better off using rebates rather than just lowering the price of a good because

Two-part pricing allows the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

A perfect price discriminating equilibrium maximizes

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. If the marginal cost of installing carpet is a constant $1 per sq yard, what price does Bob charge each segment?

Why doesn't a firm price discriminate based on income levels?

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market , whereas in perfect price discrimination .

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

If a firm sells to two distinct identifiable markets and resale is impossible, why is price discrimination more profitable than setting a single price?

Purchasing a season pass to the local symphony

Which of the following is an example for group price discrimination?

A firm that practices group price discrimination will set the lower price in the market that has the most elastic demand.

When firms price discriminate they

Suppose a profit-maximizing monopoly is able to employ group price discrimination. The marginal cost of providing the good is constant and the same in both markets. The marginal revenue the firm earns on the last unit sold in the market with the lower price will be

A perfect price discriminator

What is one reason suppliers might offer a discount for quantity purchases?

A firm engaging in group price discrimination

Group price discrimination results in social welfare that ________ under a single-price monopoly.

If the price of business broadband is greater than that of residential broadband, all else equal

A group price discriminator sells its product in Florida for three times the price it sets in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0, the demand in Florida

Firms are better off using rebates rather than just lowering the price of a good because

Two-part pricing allows the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Why don't we see firms tie-in the sales of fish filets with the sales of pencils?

A perfect price discriminating equilibrium maximizes

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. If the marginal cost of installing carpet is a constant $1 per sq yard, what price does Bob charge each segment?

Why doesn't a firm price discriminate based on income levels?

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market ________, whereas in perfect price discrimination ________.

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

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market , whereas in perfect price discrimination .