Question 1

A photograph processing machine company requiring customers who buy a processing machine to purchase chemicals and photographic paper from it is an example of

Accepted Answer

A)  bundling. 
B)  a requirement tie-in sale. 
C)  nonlinear pricing. 
D)  two-part pricing. 
A)  bundling. 
B)  a requirement tie-in sale. 
C)  nonlinear pricing. 
D)  two-part pricing. B

Question 2

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 B

Question 3

Advertising that has the fine print "professional driver on a closed course,"

Accepted Answer

A)  is likely engaged in persuasive advertising. 
B)  is likely engaged in informative advertising. 
C)  is likely engaged in strategic advertising. 
D)  is likely engaged in false advertising. 
A)  is likely engaged in persuasive advertising. 
B)  is likely engaged in informative advertising. 
C)  is likely engaged in strategic advertising. 
D)  is likely engaged in false advertising. A

Question 4

Assume a car-detailing company can offer customers "#1 Mom" decals and flame decals at a zero marginal and average cost.The following table shows each customer's marginal willingness to pay for each individual decal,and for a bundle containing both.If the decals are sold in a pure bundle,the profit-maximizing price is

Accepted Answer

A)  $75. 
B)  $80. 
C)  $120. 
D)  $140. 
A)  $75. 
B)  $80. 
C)  $120. 
D)  $140.

Question 5

When firms price discriminate they turn ________ into ________.

Accepted Answer

A)  producer surplus; revenue 
B)  consumer surplus; profit 
C)  total cost; profit 
D)  producer surplus; consumer surplus 
A)  producer surplus; revenue 
B)  consumer surplus; profit 
C)  total cost; profit 
D)  producer surplus; consumer surplus

Question 6

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 7

A firm advertising using an expensive,famous spokesperson is often

Accepted Answer

A)  aimed to raise rivals' costs. 
B)  used to increase the total market demand. 
C)  used to steal customers from rivals. 
D)  used to focus on general problems the product addresses. 
A)  aimed to raise rivals' costs. 
B)  used to increase the total market demand. 
C)  used to steal customers from rivals. 
D)  used to focus on general problems the product addresses.

Question 8

If a monopoly can advertise and as a result the demand curve will become more inelastic,the monopoly

Accepted Answer

A)  should always engage in the advertising. 
B)  should engage in the advertising until the demand curve becomes more elastic. 
C)  will earn higher gross profit if it advertises. 
D)  None of the above. 
A)  should always engage in the advertising. 
B)  should engage in the advertising until the demand curve becomes more elastic. 
C)  will earn higher gross profit if it advertises. 
D)  None of the above.

Question 9

A monopoly faces the following demand function: Q = 100 - p + sqrt(A),where A equals the dollar amount spent on advertising.If the cost function is A + 10 + 2Q,what are the profit-maximizing levels of price,output,and advertising? Compare this outcome to the case where the firm does not advertise at all.

Accepted Answer

(1)π = (100 - Q + sqrt(A))Q - 10 - 2Q -

Question 10

Consider a car dealership advertises a three-year lease at $250 per month.When you arrive to apply,you discover that the lease requires a down payment of $3600 dollars.You will undertake the lease if

Accepted Answer

A)  you value the lease at least $350 per month. 
B)  you value the lease at least $250 per month, the $3600 is a sunk cost. 
C)  you value the lease less than $350 per month. 
D)  you value buying a new car at $400 per month. 
A)  you value the lease at least $350 per month. 
B)  you value the lease at least $250 per month, the $3600 is a sunk cost. 
C)  you value the lease less than $350 per month. 
D)  you value buying a new car at $400 per month.

Question 11

Since a monopoly faces no competitors,it need not advertise.

Accepted Answer

A) True 
 B)False

Question 12

-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 13

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 14

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

Question 15

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

Accepted Answer

Consumers prefer a single pric

Question 16

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

Question 17

Assume a car-detailing company can offer customers "#1 Mom" decals and flame decals at a zero marginal and average cost.The following table shows each customer's marginal willingness to pay for each individual decal,and for a bundle containing both.Which strategy yields the maximum profit,and what maximum profit is obtained?

Accepted Answer

A)  Sell separately and make a profit of $130. 
B)  Sell separately and make a profit of $180. 
C)  Bundle and make a profit of $150. 
D)  Bundle and make a profit of $215. 
A)  Sell separately and make a profit of $130. 
B)  Sell separately and make a profit of $180. 
C)  Bundle and make a profit of $150. 
D)  Bundle and make a profit of $215.

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

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

Accepted Answer

A)  Perfect price discrimination doesn't work. 
B)  Transaction costs erode the profit of perfect price discrimination. 
C)  Consumers are ill-informed and tend to complain too much. 
D)  Uniform pricing is always more profitable and more fair as well. 
A)  Perfect price discrimination doesn't work. 
B)  Transaction costs erode the profit of perfect price discrimination. 
C)  Consumers are ill-informed and tend to complain too much. 
D)  Uniform pricing is always more profitable and more fair as well.

Question 20

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one.This is necessarily an example of quantity discrimination.

Accepted Answer

A) True 
 B)False

A photograph processing machine company requiring customers who buy a processing machine to purchase chemicals and photographic paper from it is an example of

Why do firms engage in price discrimination?

Advertising that has the fine print "professional driver on a closed course,"

When firms price discriminate they turn into .

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

A firm advertising using an expensive,famous spokesperson is often

If a monopoly can advertise and as a result the demand curve will become more inelastic,the monopoly

Consider a car dealership advertises a three-year lease at $250 per month.When you arrive to apply,you discover that the lease requires a down payment of $3600 dollars.You will undertake the lease if

Since a monopoly faces no competitors,it need not advertise.

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

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

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

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

-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?

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one.This is necessarily an example of quantity discrimination.

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 12: Pricing and Advertising

A photograph processing machine company requiring customers who buy a processing machine to purchase chemicals and photographic paper from it is an example of

Why do firms engage in price discrimination?

Advertising that has the fine print "professional driver on a closed course,"

When firms price discriminate they turn ________ into ________.

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

A firm advertising using an expensive,famous spokesperson is often

If a monopoly can advertise and as a result the demand curve will become more inelastic,the monopoly

Consider a car dealership advertises a three-year lease at $250 per month.When you arrive to apply,you discover that the lease requires a down payment of $3600 dollars.You will undertake the lease if

Since a monopoly faces no competitors,it need not advertise.

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

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

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

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

-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?

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

A mail-order clothing company offers a discount if customers purchase two shirts instead of only one.This is necessarily an example of quantity discrimination.

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

When firms price discriminate they turn into .