Question 1

With two-part pricing, a firm

Accepted Answer

A) charges a lump-sum fee that gives the consumer the right to buy a good or service. 
B) must have market power. 
C) must be able to prevent resale. 
D) All of the above. 
A) charges a lump-sum fee that gives the consumer the right to buy a good or service. 
B) must have market power. 
C) must be able to prevent resale. 
D) All of the above.

Question 2

Which of the following is likely hardest to resell?

Accepted Answer

A) An Apple iPod 
B) A discount airline ticket you bought with your frequent flyer miles 
C) A used car 
D) The free spa treatment you won at a raffle 
A) An Apple iPod 
B) A discount airline ticket you bought with your frequent flyer miles 
C) A used car 
D) The free spa treatment you won at a raffle

Question 3

Without price discrimination, a firm

Accepted Answer

A) faces a tradeoff when pricing a good that has customers with different willingness to pay. 
B) cannot maximize profit. 
C) has no market power. 
D) does not get any producer surplus, with all of the surplus going to consumers. 
A) faces a tradeoff when pricing a good that has customers with different willingness to pay. 
B) cannot maximize profit. 
C) has no market power. 
D) does not get any producer surplus, with all of the surplus going to consumers.

Question 4

At many municipal golf courses, local residents pay a lower fee to play than other golfers do. One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Accepted Answer

A) they can check the identification cards of golfers. 
B) local resident golfers and other golfers have the same price elasticity of demand to play at the municipal course. 
C) there are many golf courses nearby from which golfers can choose. 
D) they require all golfers to rent a cart. 
A) they can check the identification cards of golfers. 
B) local resident golfers and other golfers have the same price elasticity of demand to play at the municipal course. 
C) there are many golf courses nearby from which golfers can choose. 
D) they require all golfers to rent a cart.

Question 5

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part price with the lump sum tariff equal to the total amount of potential consumer surplus.

Accepted Answer

The producer wants to set the lump sum p

Question 6

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then

Accepted Answer

A) consumers who buy larger quantities have a higher price elasticity of demand. 
B) consumers who buy larger quantities have a lower price elasticity of demand. 
C) consumers who buy smaller quantities have a lower price elasticity of demand. 
D) Both A and C. 
A) consumers who buy larger quantities have a higher price elasticity of demand. 
B) consumers who buy larger quantities have a lower price elasticity of demand. 
C) consumers who buy smaller quantities have a lower price elasticity of demand. 
D) Both A and C.

Question 7

A perfect price discriminating monopoly

Accepted Answer

A) captures all consumer surplus. 
B) creates deadweight loss. 
C) increases market inefficiency. 
D) decreases total welfare. 
A) captures all consumer surplus. 
B) creates deadweight loss. 
C) increases market inefficiency. 
D) decreases total welfare.

Question 8

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will

Accepted Answer

A) set a higher price in the market that is more price inelastic. 
B) set a lower price in the market that is more price inelastic. 
C) set price so as to equate the elasticity of demand across markets. 
D) set price equal to marginal cost in both markets. 
A) set a higher price in the market that is more price inelastic. 
B) set a lower price in the market that is more price inelastic. 
C) set price so as to equate the elasticity of demand across markets. 
D) set price equal to marginal cost in both markets.

Question 9

Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result

Accepted Answer

A) price elasticity of demand is the same in each market. 
B) the price-inelastic market will buy zero units. 
C) marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market. 
D) the deadweight loss is less than if the firm price discriminated. 
A) price elasticity of demand is the same in each market. 
B) the price-inelastic market will buy zero units. 
C) marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market. 
D) the deadweight loss is less than if the firm price discriminated.

Question 10

Airlines offer lower prices to vacationers than to business travelers because

Accepted Answer

A) of government regulations requiring them to do so. 
B) business travelers do not care at all about costs. 
C) business travelers are less flexible in their travel plans than vacationers are. 
D) airlines know that business travelers enjoy flying more than vacationers do. 
A) of government regulations requiring them to do so. 
B) business travelers do not care at all about costs. 
C) business travelers are less flexible in their travel plans than vacationers are. 
D) airlines know that business travelers enjoy flying more than vacationers do.

Question 11

Why do firms engage in price discrimination?

Accepted Answer

A) to decrease cost 
B) to increase profits 
C) to increase consumer surplus 
D) to prohibit the resale of their products 
A) to decrease cost 
B) to increase profits 
C) to increase consumer surplus 
D) to prohibit the resale of their products

Question 12

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

Accepted Answer

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

Question 13

In two-part pricing with identical consumers, a firm

Accepted Answer

A) charges a lump-sum fee equal to the consumer surplus. 
B) sets unit price below marginal cost. 
C) should go with single-price monopoly pricing to maximize profits. 
D) Both A and B. 
A) charges a lump-sum fee equal to the consumer surplus. 
B) sets unit price below marginal cost. 
C) should go with single-price monopoly pricing to maximize profits. 
D) Both A and B.

Question 14

If a firm faces a flat demand curve

Accepted Answer

A) it cannot engage in price discrimination. 
B) it can only engage in two-part tariffs. 
C) it can only engage in perfect price discrimination. 
D) None of the above. 
A) it cannot engage in price discrimination. 
B) it can only engage in two-part tariffs. 
C) it can only engage in perfect price discrimination. 
D) None of the above.

Question 15

During a hot summer weekend, the only supermarket near the beach decides to charge consumers $6.50 for the first 12-pack of soda pop, $5.50 for the second and third 12-packs, and $5.25 for all subsequent purchases during the same shopping trip. This would be considered

Accepted Answer

A) an example of declining-block pricing. 
B) not very smart since consumers will buy soda pop regardless of the price. 
C) an example of monopoly pricing. 
D) an example of an inelastic demand curve. 
A) an example of declining-block pricing. 
B) not very smart since consumers will buy soda pop regardless of the price. 
C) an example of monopoly pricing. 
D) an example of an inelastic demand curve.

Question 16

Declining-block quantity discrimination makes sense if

Accepted Answer

A) buyers of smaller quantities are more price sensitive than buyers of larger quantities. 
B) buyers of smaller quantities are less price sensitive than buyers of larger quantities. 
C) demand for the good is perfectly elastic. 
D) the lower price for larger quantities encourages all consumers to purchase the larger quantity. 
A) buyers of smaller quantities are more price sensitive than buyers of larger quantities. 
B) buyers of smaller quantities are less price sensitive than buyers of larger quantities. 
C) demand for the good is perfectly elastic. 
D) the lower price for larger quantities encourages all consumers to purchase the larger quantity.

Question 17

Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"?

Accepted Answer

A) Because they are worried about running out of supply, leaving some of their customers unhappy that they can't buy the good. 
B) Because they are trying to use scarcity as a way to improve the brand image of the good. 
C) Because they are limiting the possibility of arbitrage, where consumers buy in a low price area and resell in a higher price area. 
D) Because they are worried that they'll run out of the good during the all-important holiday season. 
A) Because they are worried about running out of supply, leaving some of their customers unhappy that they can't buy the good. 
B) Because they are trying to use scarcity as a way to improve the brand image of the good. 
C) Because they are limiting the possibility of arbitrage, where consumers buy in a low price area and resell in a higher price area. 
D) Because they are worried that they'll run out of the good during the all-important holiday season.

Question 18

With peak-load pricing, a firm

Accepted Answer

A) charges more for a good during periods of high demand. 
B) charges more for a hotel room the higher up the mountain it is. 
C) charges less for a good during periods of high demand, because of regulatory reasons. 
D) is generally used during January and February. 
A) charges more for a good during periods of high demand. 
B) charges more for a hotel room the higher up the mountain it is. 
C) charges less for a good during periods of high demand, because of regulatory reasons. 
D) is generally used during January and February.

Question 19

A firm practicing group price discrimination across two countries sets MR = common MC and therefore

Accepted Answer

A) price will be the same in both countries. 
B) price will be twice MR. 
C) profit will be the same in both countries. 
D) price will likely be different in each country. 
A) price will be the same in both countries. 
B) price will be twice MR. 
C) profit will be the same in both countries. 
D) price will likely be different in each country.

Question 20

The case on textbook publishers shows that

Accepted Answer

A) if imports are allowed, price discrimination is difficult or impossible. 
B) if imports are allowed, price discrimination is possible. 
C) publishers have a difficult time identifying the groups involved. 
D) publishers should not migrate to electronic textbooks. 
A) if imports are allowed, price discrimination is difficult or impossible. 
B) if imports are allowed, price discrimination is possible. 
C) publishers have a difficult time identifying the groups involved. 
D) publishers should not migrate to electronic textbooks.

With two-part pricing, a firm

Which of the following is likely hardest to resell?

Without price discrimination, a firm

At many municipal golf courses, local residents pay a lower fee to play than other golfers do. One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part price with the lump sum tariff equal to the total amount of potential consumer surplus.

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then

A perfect price discriminating monopoly

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will

Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result

Airlines offer lower prices to vacationers than to business travelers because

Why do firms engage in price discrimination?

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

In two-part pricing with identical consumers, a firm

If a firm faces a flat demand curve

During a hot summer weekend, the only supermarket near the beach decides to charge consumers $6.50 for the first 12-pack of soda pop, $5.50 for the second and third 12-packs, and $5.25 for all subsequent purchases during the same shopping trip. This would be considered

Declining-block quantity discrimination makes sense if

Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"?

With peak-load pricing, a firm

A firm practicing group price discrimination across two countries sets MR = common MC and therefore

The case on textbook publishers shows that

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

With two-part pricing, a firm

Which of the following is likely hardest to resell?

Without price discrimination, a firm

At many municipal golf courses, local residents pay a lower fee to play than other golfers do. One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part price with the lump sum tariff equal to the total amount of potential consumer surplus.

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then

A perfect price discriminating monopoly

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will

Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result

Airlines offer lower prices to vacationers than to business travelers because

Why do firms engage in price discrimination?

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

In two-part pricing with identical consumers, a firm

If a firm faces a flat demand curve

During a hot summer weekend, the only supermarket near the beach decides to charge consumers $6.50 for the first 12-pack of soda pop, $5.50 for the second and third 12-packs, and $5.25 for all subsequent purchases during the same shopping trip. This would be considered

Declining-block quantity discrimination makes sense if

Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"?

With peak-load pricing, a firm

A firm practicing group price discrimination across two countries sets MR = common MC and therefore

The case on textbook publishers shows that

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