Question 1

What is the primary difference between bundling and tie-ins?

Accepted Answer

A) Bundling is typically a one-off purchase. 
B) Contractual arrangements 
C) Tie-ins are one-off purchases. 
D) Bundling is illegal and tie-ins are legal. 
A) Bundling is typically a one-off purchase. 
B) Contractual arrangements 
C) Tie-ins are one-off purchases. 
D) Bundling is illegal and tie-ins are legal.

Question 2

Which of the following sellers is most able to perfectly price discriminate?

Accepted Answer

A) a college or university 
B) the post office 
C) a clothing store 
D) a grocery supermarket 
A) a college or university 
B) the post office 
C) a clothing store 
D) a grocery supermarket

Question 3

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. If the firm will charge a monthly access fee plus a per hour rate, the monthly access fee will equal

Accepted Answer

A) $1. 
B) $5. 
C) $8. 
D) $16. 
A) $1. 
B) $5. 
C) $8. 
D) $16.

Question 4

When a firm has a monopoly in a market and also perfectly price discriminates, total welfare

Accepted Answer

A) is maximized. 
B) is lower than in a perfectly competitive market. 
C) is higher than in a perfectly competitive market. 
D) is minimized. 
A) is maximized. 
B) is lower than in a perfectly competitive market. 
C) is higher than in a perfectly competitive market. 
D) is minimized.

Question 5

Individual price discrimination is used when

Accepted Answer

A) firms are dealing with individual consumers, such as in a line at the coffee shop. 
B) firms cannot easily determine consumers' reservation prices. 
C) firms are selling to non-local buyers. 
D) salespeople are in a difficult industry, such as auto sales. 
A) firms are dealing with individual consumers, such as in a line at the coffee shop. 
B) firms cannot easily determine consumers' reservation prices. 
C) firms are selling to non-local buyers. 
D) salespeople are in a difficult industry, such as auto sales.

Question 6

Firms use various methods for identifying customers such as ________ and ________.

Accepted Answer

A) observable characteristics such as willingness to wait in long lines; their actions such as whether or not they live a long time 
B) observable characteristics such as age; their actions such as willingness to wait in long lines 
C) the color of their hair; whether or not they roll their eyes at high prices 
D) None of the above. 
A) observable characteristics such as willingness to wait in long lines; their actions such as whether or not they live a long time 
B) observable characteristics such as age; their actions such as willingness to wait in long lines 
C) the color of their hair; whether or not they roll their eyes at high prices 
D) None of the above.

Question 7

A primary difference between rebates and coupons?

Accepted Answer

A) Coupons allow individuals to sort themselves into the high-elasticity group after the sale. 
B) Neither coupons or rebates are redeemed in high numbers. 
C) Rebates allow individuals to sort themselves into the high-elasticity group after the sale. 
D) Coupons are legal and rebates are illegal. 
A) Coupons allow individuals to sort themselves into the high-elasticity group after the sale. 
B) Neither coupons or rebates are redeemed in high numbers. 
C) Rebates allow individuals to sort themselves into the high-elasticity group after the sale. 
D) Coupons are legal and rebates are illegal.

Question 8

While price discrimination is possible between two markets it is not possible in more than two.

Accepted Answer

A) True 
 B)False

Question 9

Stores such as Costco and Sam's Club require an annual membership before you can shop there. This is a form of

Accepted Answer

A) two-part pricing. 
B) price gouging. 
C) tie-in sales. 
D) anti-competitive behavior. 
A) two-part pricing. 
B) price gouging. 
C) tie-in sales. 
D) anti-competitive behavior.

Question 10

Consumers who put a high value on a service

Accepted Answer

A) are better off with perfect price discrimination. 
B) are better off under a single-price monopoly. 
C) are indifferent between perfect price discrimination and a single-price monopoly. 
D) incur deadweight loss under either single-price monopoly or perfect price discrimination. 
A) are better off with perfect price discrimination. 
B) are better off under a single-price monopoly. 
C) are indifferent between perfect price discrimination and a single-price monopoly. 
D) incur deadweight loss under either single-price monopoly or perfect price discrimination.

Question 11

Consumers 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.

Question 12

Many theme parks charge an entrance fee and a per-ride fee equal to zero. This is an example of

Accepted Answer

A) bundling. 
B) two-part pricing. 
C) multi-market price discrimination. 
D) perfect price discrimination. 
A) bundling. 
B) two-part pricing. 
C) multi-market price discrimination. 
D) perfect price discrimination.

Question 13

What is one way firms can enforce tie-in sales?

Accepted Answer

A) One of the goods has no close substitutes 
B) Through contractual arrangements 
C) Information asymmetry 
D) Any of the above. 
A) One of the goods has no close substitutes 
B) Through contractual arrangements 
C) Information asymmetry 
D) Any of the above.

Question 14

If Ben values good X more than good Y and Catherine values good Y more than good X a firm can increase its profits by

Accepted Answer

A) charging the same price for both goods. 
B) bundling the goods. 
C) selling the goods in a competitive market. 
D) charging one price per good. 
A) charging the same price for both goods. 
B) bundling the goods. 
C) selling the goods in a competitive market. 
D) charging one price per good.

Question 15

What is one reason consumers might demand a discount for quantity purchases?

Accepted Answer

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

Question 16

Which of the following is an example of pure bundling?

Accepted Answer

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

Question 17

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

Accepted Answer

First, price discrimination allows a fir

Question 18

If reservation prices are positively correlated, then

Accepted Answer

A) pure bundling cannot increase a firm's profit. 
B) pure bundling can increase a firm's profit. 
C) it is unclear whether or not pure bundling can increase a firm's profit. 
D) consumers lose leverage over firms. 
A) pure bundling cannot increase a firm's profit. 
B) pure bundling can increase a firm's profit. 
C) it is unclear whether or not pure bundling can increase a firm's profit. 
D) consumers lose leverage over firms.

Question 19

A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm. Those who check in early are much more likely to use the hotel's pool. Explain why this price difference may not be price discrimination.

Accepted Answer

The marginal cost of providing a hotel s

Question 20

What is one reason online prices might be considerably lower than brick-and-mortar prices?

Accepted Answer

A) Online retailers engage in more price discrimination. 
B) Brick-and-mortar retailers engage in more price discrimination. 
C) Brick and mortar retailers may have higher costs. 
D) Online retailers are more likely to have steep demand curves. 
A) Online retailers engage in more price discrimination. 
B) Brick-and-mortar retailers engage in more price discrimination. 
C) Brick and mortar retailers may have higher costs. 
D) Online retailers are more likely to have steep demand curves.

What is the primary difference between bundling and tie-ins?

Which of the following sellers is most able to perfectly price discriminate?

When a firm has a monopoly in a market and also perfectly price discriminates, total welfare

Individual price discrimination is used when

Firms use various methods for identifying customers such as and .

A primary difference between rebates and coupons?

While price discrimination is possible between two markets it is not possible in more than two.

Stores such as Costco and Sam's Club require an annual membership before you can shop there. This is a form of

Consumers who put a high value on a service

Consumers are better off with pricing in the following order: 1); 2); 3).

Many theme parks charge an entrance fee and a per-ride fee equal to zero. This is an example of

What is one way firms can enforce tie-in sales?

If Ben values good X more than good Y and Catherine values good Y more than good X a firm can increase its profits by

What is one reason consumers might demand a discount for quantity purchases?

Which of the following is an example of pure bundling?

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

If reservation prices are positively correlated, then

A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm. Those who check in early are much more likely to use the hotel's pool. Explain why this price difference may not be price discrimination.

What is one reason online prices might be considerably lower than brick-and-mortar prices?

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

What is the primary difference between bundling and tie-ins?

Which of the following sellers is most able to perfectly price discriminate?

When a firm has a monopoly in a market and also perfectly price discriminates, total welfare

Individual price discrimination is used when

Firms use various methods for identifying customers such as ________ and ________.

A primary difference between rebates and coupons?

While price discrimination is possible between two markets it is not possible in more than two.

Stores such as Costco and Sam's Club require an annual membership before you can shop there. This is a form of

Consumers who put a high value on a service

Consumers are better off with pricing in the following order: 1)________; 2)________; 3)________.

Many theme parks charge an entrance fee and a per-ride fee equal to zero. This is an example of

What is one way firms can enforce tie-in sales?

If Ben values good X more than good Y and Catherine values good Y more than good X a firm can increase its profits by

What is one reason consumers might demand a discount for quantity purchases?

Which of the following is an example of pure bundling?

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

If reservation prices are positively correlated, then

A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm. Those who check in early are much more likely to use the hotel's pool. Explain why this price difference may not be price discrimination.

What is one reason online prices might be considerably lower than brick-and-mortar prices?

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

Firms use various methods for identifying customers such as and .

Consumers are better off with pricing in the following order: 1); 2); 3).