Question 1

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

Accepted Answer

First,price discrimination allows a firm

Question 2

An electric utility is going to use a block-pricing schedule.They plan to charge P1 for the first Q1 units and P2 for the subsequent units.The units sold at P2 are the total units sold,Q2,minus the total units sold at P1.The inverse demand curve is P = $100 - Q,and the marginal and average cost is $40.Use calculus to solve for P1,P2,Q1,Q2.

Accepted Answer

The profit equation for this utility is

Question 3

Mouthwash is sold in 24 oz bottles for $2.40 and in 12 oz.bottles for $1.20.This represents

Accepted Answer

A)  price differentiation. 
B)  price discrimination. 
C)  marginal cost pricing. 
D)  None of the above. 
A)  price differentiation. 
B)  price discrimination. 
C)  marginal cost pricing. 
D)  None of the above.

Question 4

-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.Bob is likely to price discriminate because

Accepted Answer

A)  elasticities differ across markets. 
B)  the installation of carpets cannot be resold. 
C)  Bob can probably identify which consumers belong to which segment. 
D)  All of the above. 
A)  elasticities differ across markets. 
B)  the installation of carpets cannot be resold. 
C)  Bob can probably identify which consumers belong to which segment. 
D)  All of the above.

Question 5

Firms price discriminate to maximize total revenue.

Accepted Answer

A) True 
 B)False

Question 6

If a market is controlled by a perfect-price-discriminating monopoly,then

Accepted Answer

A)  a deadweight loss is generated. 
B)  there is no consumer surplus. 
C)  consumer surplus is the same as under perfect competition. 
D)  output is less than that of a single-price monopoly. 
A)  a deadweight loss is generated. 
B)  there is no consumer surplus. 
C)  consumer surplus is the same as under perfect competition. 
D)  output is less than that of a single-price monopoly.

Question 7

Assume a company can offer customers cable television and Internet service at essentially zero marginal and average cost.The following table shows each customer's marginal willingness to pay for television,Internet services,and for a bundle containing both.If television and Internet services are sold separately,the profit-maximizing prices are

Accepted Answer

A)  television $100 and Internet services $60. 
B)  television $80 and Internet services $100. 
C)  television $80 and Internet services $60. 
D)  television $100 and Internet services $100. 
A)  television $100 and Internet services $60. 
B)  television $80 and Internet services $100. 
C)  television $80 and Internet services $60. 
D)  television $100 and Internet services $100.

Question 8

At the current price of a good,Jessica's consumer surplus equals 12,Lauren's consumer surplus equals 14,and Isabel's consumer surplus is 4.By perfect discrimination,a monopolist could increase his profit by

Accepted Answer

A)  4. 
B)  12. 
C)  16. 
D)  30. 
A)  4. 
B)  12. 
C)  16. 
D)  30.

Question 9

Explain why advertising that results in spuriously differentiated products may result in a deadweight loss to total welfare.

Accepted Answer

The firm spends money to steal customers

Question 10

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 11

Suppose a monopoly's inverse demand curve is P = 100 -Q,it produces a product with a constant marginal cost of 20,and it has no fixed costs.How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing?

Accepted Answer

A)  The deadweight loss is smaller by 800. 
B)  The deadweight loss is greater by 800. 
C)  The deadweight loss is smaller by 1600. 
D)  The deadweight loss is greater by 1600. 
A)  The deadweight loss is smaller by 800. 
B)  The deadweight loss is greater by 800. 
C)  The deadweight loss is smaller by 1600. 
D)  The deadweight loss is greater by 1600.

Question 12

Theatres charge lower prices for a matinee and usually don't accept coupons for the night showing of movies because

Accepted Answer

A)  consumers that attend the matinee have a higher price elasticity of demand. 
B)  consumers that attend the night show have a lower price elasticity of demand. 
C)  it increases profits compared to charging a single price. 
D)  All of the above. 
A)  consumers that attend the matinee have a higher price elasticity of demand. 
B)  consumers that attend the night show have a lower price elasticity of demand. 
C)  it increases profits compared to charging a single price. 
D)  All of the above.

Question 13

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

Accepted Answer

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

Question 14

Which of the following helps a monopoly perfectly price discriminate?

Accepted Answer

A)  unit demand by each consumer 
B)  the product is perishable 
C)  the product is personalizable 
D)  All of the above. 
A)  unit demand by each consumer 
B)  the product is perishable 
C)  the product is personalizable 
D)  All of the above.

Question 15

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

Accepted Answer

A)  There are no other firms in the market. 
B)  The good is a nondurable. 
C)  The good cannot be easily resold. 
D)  All of the above. 
A)  There are no other firms in the market. 
B)  The good is a nondurable. 
C)  The good cannot be easily resold. 
D)  All of the above.

Question 16

A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

Accepted Answer

A)  identify customers with apparently more elastic demand and offer them a lower price. 
B)  retain loyal customers who are not price sensitive. 
C)  offer discounts to consumers who buy larger quantities. 
D)  perfectly price discriminate. 
A)  identify customers with apparently more elastic demand and offer them a lower price. 
B)  retain loyal customers who are not price sensitive. 
C)  offer discounts to consumers who buy larger quantities. 
D)  perfectly price discriminate.

Question 20

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 positive income elasticity. 
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 positive income elasticity. 
D)  generally speaking, broadband is equally priced.

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

Mouthwash is sold in 24 oz bottles for $2.40 and in 12 oz.bottles for $1.20.This represents

-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.Bob is likely to price discriminate because

Firms price discriminate to maximize total revenue.

If a market is controlled by a perfect-price-discriminating monopoly,then

At the current price of a good,Jessica's consumer surplus equals 12,Lauren's consumer surplus equals 14,and Isabel's consumer surplus is 4.By perfect discrimination,a monopolist could increase his profit by

Explain why advertising that results in spuriously differentiated products may result in a deadweight loss to total welfare.

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

Suppose a monopoly's inverse demand curve is P = 100 -Q,it produces a product with a constant marginal cost of 20,and it has no fixed costs.How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing?

Theatres charge lower prices for a matinee and usually don't accept coupons for the night showing of movies because

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

Which of the following helps a monopoly perfectly price discriminate?

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

A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus.

A perfect price discriminator

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

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

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

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

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

Mouthwash is sold in 24 oz bottles for $2.40 and in 12 oz.bottles for $1.20.This represents

-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.Bob is likely to price discriminate because

Firms price discriminate to maximize total revenue.

If a market is controlled by a perfect-price-discriminating monopoly,then

At the current price of a good,Jessica's consumer surplus equals 12,Lauren's consumer surplus equals 14,and Isabel's consumer surplus is 4.By perfect discrimination,a monopolist could increase his profit by

Explain why advertising that results in spuriously differentiated products may result in a deadweight loss to total welfare.

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

Suppose a monopoly's inverse demand curve is P = 100 -Q,it produces a product with a constant marginal cost of 20,and it has no fixed costs.How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing?

Theatres charge lower prices for a matinee and usually don't accept coupons for the night showing of movies because

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

Which of the following helps a monopoly perfectly price discriminate?

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

A perfect-price-discriminating monopoly maximizes social welfare as measured by the sum of producer surplus plus consumer surplus.

A perfect price discriminator

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

Coupons represent a form of price discrimination because they offer a low-cost way for firms to

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

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