Question 1

Assume a firm organizes all individuals by their willingness to pay (least to most).If the firm starts to perfectly price discriminate,what is likely to happen?

Accepted Answer

A)  Consumers start to arbitrage amongst themselves. 
B)  The firm's profits will be maximized. 
C)  The firm's costs will be minimized. 
D)  The firm starts to arbitrage with consumers. 
A)  Consumers start to arbitrage amongst themselves. 
B)  The firm's profits will be maximized. 
C)  The firm's costs will be minimized. 
D)  The firm starts to arbitrage with consumers.

Question 2

Advertising for Milk and Beef is usually done by

Accepted Answer

A)  interest groups that represent the whole industry. 
B)  a single firm in the market. 
C)  a small set of firms in a market. 
D)  It is not done because it doesn't pay to advertise homogeneous products. 
A)  interest groups that represent the whole industry. 
B)  a single firm in the market. 
C)  a small set of firms in a market. 
D)  It is not done because it doesn't pay to advertise homogeneous products.

Question 3

A specialized rice grower sells rice in two markets,the United States and Japan,and the marginal cost the same in both markets.The price elasticity of demand in the United States is -2.0,and the price elasticity of demand in Japan is -1.5.If the grower practices multimarket price discrimination,which country's consumers will pay a higher price and by how much?

Accepted Answer

p_us(1 + 1/-2)= p_j(1 + 1/-1.5).Rea

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

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 6

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 7

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 8

Suppose two countries,A and B,are at war with each other.Country A is very wealthy; country B is very poor.The XYZ Co.produces tanks.Is XYZ able to set a different price for the tank sold to country A than the price for the tank sold to country B? Explain.

Accepted Answer

XYZ can practice multimarket p

Question 9

Tie-in sales are most advantageous to the seller when

Accepted Answer

A)  the demands for the two goods are negatively correlated. 
B)  the demands for the two goods are positively correlated. 
C)  the demands for the two goods are unrelated. 
D)  there are economies of scope. 
A)  the demands for the two goods are negatively correlated. 
B)  the demands for the two goods are positively correlated. 
C)  the demands for the two goods are unrelated. 
D)  there are economies of scope.

Question 10

The deadweight loss generated by a perfect-price-discriminating monopoly

Accepted Answer

A)  equals the deadweight loss of a single-price monopoly. 
B)  is greater than the deadweight loss of a single-price monopoly. 
C)  equals zero. 
D)  equals the sum of all lost consumer surplus. 
A)  equals the deadweight loss of a single-price monopoly. 
B)  is greater than the deadweight loss of a single-price monopoly. 
C)  equals zero. 
D)  equals the sum of all lost consumer surplus.

Question 11

At the current price of a good,Al's consumer surplus equals 15 and Ben's consumer surplus equals 15.By using two-part pricing,a monopolist could increase his profit by

Accepted Answer

A)  8. 
B)  16. 
C)  15. 
D)  30. 
A)  8. 
B)  16. 
C)  15. 
D)  30.

Question 12

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 non-durable. 
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 non-durable. 
C)  The good cannot be easily resold. 
D)  All of the above.

Question 13

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 14

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 15

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.Compared to the consumer surplus if the market were perfectly competitive,consumer surplus is how much less when the monopolist practices perfect price discrimination?

Accepted Answer

A)  3200 
B)  1600 
C)  800 
D)  0 
A)  3200 
B)  1600 
C)  800 
D)  0

Question 16

A good example of perfect price discrimination is

Accepted Answer

A)  selling concert tickets to individuals on the street corner. 
B)  buying concert tickets at the ticket window. 
C)  selling concert tickets at the ticket window. 
D)  buying a concert ticket on the street corner. 
A)  selling concert tickets to individuals on the street corner. 
B)  buying concert tickets at the ticket window. 
C)  selling concert tickets at the ticket window. 
D)  buying a concert ticket on the street corner.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A monopoly will not be able to perfectly price discriminate if

Accepted Answer

A)  each consumer does not reveal her reservation price. 
B)  demand is very elastic. 
C)  the firm's marginal cost curve is upward sloping. 
D)  All of the above. 
A)  each consumer does not reveal her reservation price. 
B)  demand is very elastic. 
C)  the firm's marginal cost curve is upward sloping. 
D)  All of the above.

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

Assume a firm organizes all individuals by their willingness to pay (least to most).If the firm starts to perfectly price discriminate,what is likely to happen?

Advertising for Milk and Beef is usually done by

-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

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

Airlines offer lower prices to vacationers than to business travelers because

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

Suppose two countries,A and B,are at war with each other.Country A is very wealthy; country B is very poor.The XYZ Co.produces tanks.Is XYZ able to set a different price for the tank sold to country A than the price for the tank sold to country B? Explain.

Tie-in sales are most advantageous to the seller when

The deadweight loss generated by a perfect-price-discriminating monopoly

At the current price of a good,Al's consumer surplus equals 15 and Ben's consumer surplus equals 15.By using two-part pricing,a monopolist could increase his profit by

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

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

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

A good example of perfect price discrimination is

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

A monopoly will not be able to perfectly price discriminate if

A perfect price discriminator

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

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

Assume a firm organizes all individuals by their willingness to pay (least to most).If the firm starts to perfectly price discriminate,what is likely to happen?

Advertising for Milk and Beef is usually done by

-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

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

Airlines offer lower prices to vacationers than to business travelers because

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

Suppose two countries,A and B,are at war with each other.Country A is very wealthy; country B is very poor.The XYZ Co.produces tanks.Is XYZ able to set a different price for the tank sold to country A than the price for the tank sold to country B? Explain.

Tie-in sales are most advantageous to the seller when

The deadweight loss generated by a perfect-price-discriminating monopoly

At the current price of a good,Al's consumer surplus equals 15 and Ben's consumer surplus equals 15.By using two-part pricing,a monopolist could increase his profit by

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

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

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

A good example of perfect price discrimination is

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

A monopoly will not be able to perfectly price discriminate if

A perfect price discriminator

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

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