Exam 12: Pricing and Advertising

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

Why do firms engage in price discrimination?

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

If both Ben and Catherine value good X more than good Y,a firm can increase profits by bundling the two products.

-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?

Tie-in sales are most advantageous to the seller when

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

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,compared to a perfectly competitive market,the change in producer surplus is

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

If consumers are identical,then