Question 1

The Clayton Act of 1936 outlawed price discrimination that reduced competition.

Accepted Answer

A) True 
 B)False

Question 2

Figure 16-7   The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its estimated demand curve for cocktails.
-Refer to Figure 16-7.The owners of the Lizard Lounge are considering the following four pricing options: 
a.A single price scheme where the cocktail price equals the monopoly price.
b.A single price scheme where the cocktail price equals the competitive price.
c.A two-part tariff: a monopoly cocktail price and a cover charge that will generate total revenue equal to the area X.
d.A two-part tariff: a competitive cocktail price and whatever cover charge that will generate a total revenue equivalent to the area X + Y + Z.
Which pricing scheme(s)achieve the economically efficient outcome?

Accepted Answer

A)  schemes a and c 
B)  scheme b 
C)  schemes b and d 
D)  scheme d only 
A)  schemes a and c 
B)  scheme b 
C)  schemes b and d 
D)  scheme d only

Question 3

Delaware and North Dakota have identical state gasoline taxes of 23.0 cents per gallon.When added to the federal gasoline tax of 18.4 cents per gallon,the total tax on one gallon of gasoline in these two states is 41.4 cents.On October 8,2013,the average price of one gallon of regular gasoline was $3.309 in Delaware and $3.394 in North Dakota.Briefly explain whether this is an example of price discrimination.Assume that the gasoline being sold is identical in both states.
Sources: gaspricewatch.com and gasbuddy.com.

Accepted Answer

This appears to be a case of p

Question 4

Draw a graph that shows producer surplus,consumer surplus,and deadweight loss in a market where the seller practices perfect price discrimination.Be sure to identify the demand curve,the marginal revenue curve,the marginal cost curve,and the profit maximizing quantity on the graph.

Accepted Answer

The perfect price discriminator sells Q₃

Question 5

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

Accepted Answer

A)  examples of zero sum games, since the value of the goods sold is exactly equal to the prices paid for them. 
B)  unproductive since the goods sold have been produced in the past. 
C)  examples of exploitation of buyers of the goods by the sellers. 
D)  examples of arbitrage. 
A)  examples of zero sum games, since the value of the goods sold is exactly equal to the prices paid for them. 
B)  unproductive since the goods sold have been produced in the past. 
C)  examples of exploitation of buyers of the goods by the sellers. 
D)  examples of arbitrage.

Question 6

Which of the following is not an advantage cost-plus pricing?

Accepted Answer

A)  It leads to profit maximization. 
B)  It is an easy method to implement if a firm produces multiple products and has overhead costs that are difficult to allocate to a particular good. 
C)  It could lead to price stability if the industry is made up of identical firms all using the same method of pricing. 
D)  It is easy to justify price increases when total costs of production increase. 
A)  It leads to profit maximization. 
B)  It is an easy method to implement if a firm produces multiple products and has overhead costs that are difficult to allocate to a particular good. 
C)  It could lead to price stability if the industry is made up of identical firms all using the same method of pricing. 
D)  It is easy to justify price increases when total costs of production increase.

Question 7

Figure 16-3   Chantal owns a hairdressing salon which caters to two main groups of customers: residents of "The Chateau," a retirement community, and other residents in the neighborhood. Figure 16-3 shows the demand curves for the residents of the retirement community, labeled Market A, and other residents in the neighborhood, labeled Market B. The demand curves are not identical.
-Refer to Figure 16-3.Which group of customers is likely to have a more elastic demand curve (more sensitive to price)?

Accepted Answer

A)  the other residents of the neighborhood - market B 
B)  There is no difference in the elasticity of demand between the two groups. 
C)  the customers from "The Chateau" - market A 
D)  There is insufficient information to answer this question. 
A)  the other residents of the neighborhood - market B 
B)  There is no difference in the elasticity of demand between the two groups. 
C)  the customers from "The Chateau" - market A 
D)  There is insufficient information to answer this question.

Question 8

Figure 16-7   The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its estimated demand curve for cocktails.
-Refer to Figure 16-7.The owners of the Lizard Lounge are considering the following four pricing options: 
a.A single price scheme where the cocktail price equals the monopoly price.
b.A single price scheme where the cocktail price equals the competitive price.
c.A two-part tariff: a monopoly price for cocktails and a cover charge that will generate total revenue equal to the area X.
d.A two-part tariff: a competitive price for cocktails and a cover charge that will generate total revenue equal to the area X + Y + Z.
Under which scheme are the Lounge customers better off?

Accepted Answer

A)  scheme a 
B)  scheme b 
C)  scheme c 
D)  scheme d 
A)  scheme a 
B)  scheme b 
C)  scheme c 
D)  scheme d

Question 9

A price-discriminating firm charges the highest price to

Accepted Answer

A)  the group with the largest demand. 
B)  the group with the most elastic demand. 
C)  the group with the least elastic demand. 
D)  the group with demand that is unit-elastic. 
A)  the group with the largest demand. 
B)  the group with the most elastic demand. 
C)  the group with the least elastic demand. 
D)  the group with demand that is unit-elastic.

Question 10

Perfect price discrimination is also known as

Accepted Answer

A)  monopoly. 
B)  first-degree price discrimination. 
C)  third-degree price discrimination. 
D)  yield management. 
A)  monopoly. 
B)  first-degree price discrimination. 
C)  third-degree price discrimination. 
D)  yield management.

Question 11

Your text refers to airlines as "The Kings of Price Discrimination." Why is price discrimination common in the airline industry?

Accepted Answer

When airlines fly with empty seats,they

Question 12

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Accepted Answer

A)  the firm must set different prices for different regions where the product is sold. 
B)  the firm must be willing to offer price discounts for senior citizens and children. 
C)  the firm must be able to divide the market in a way that makes arbitrage impossible. 
D)  the firm must choose a marketing strategy that appeals to different segments of the economy. 
A)  the firm must set different prices for different regions where the product is sold. 
B)  the firm must be willing to offer price discounts for senior citizens and children. 
C)  the firm must be able to divide the market in a way that makes arbitrage impossible. 
D)  the firm must choose a marketing strategy that appeals to different segments of the economy.

Question 13

Which of the following is a reason why airline yield management is an effective method to increase revenue?

Accepted Answer

A)  because airlines have invested heavily in developing computer models that identify optimal pricing strategies in the various market segments 
B)  because airlines have successfully induced customers to reveal their resources and preferences by offering them different versions of the product such as business class and coach plane tickets 
C)  because a ticket is a contract to transport a specific person, and is not transferable 
D)  because airlines have a monopoly in long-distance carriage 
A)  because airlines have invested heavily in developing computer models that identify optimal pricing strategies in the various market segments 
B)  because airlines have successfully induced customers to reveal their resources and preferences by offering them different versions of the product such as business class and coach plane tickets 
C)  because a ticket is a contract to transport a specific person, and is not transferable 
D)  because airlines have a monopoly in long-distance carriage

Question 14

Consider the following pricing strategies: 
a.perfect price discrimination
b.charging different prices to different groups of customers
c.optimal two-part tariff
d.single-price monopoly pricing
Which of the pricing strategies leads to the economically efficient output level?

Accepted Answer

A)  a only 
B)  a and b only 
C)  a and c only 
D)  a, b, and c only 
A)  a only 
B)  a and b only 
C)  a and c only 
D)  a, b, and c only

Question 15

With perfect price discrimination there is

Accepted Answer

A)  no deadweight loss. 
B)  no producer surplus. 
C)  one single price. 
D)  an increase in consumer surplus. 
A)  no deadweight loss. 
B)  no producer surplus. 
C)  one single price. 
D)  an increase in consumer surplus.

Question 16

Are sellers who practice arbitrage taking advantage of buyers?

Accepted Answer

No,because the seller cannot charge a bu

Question 17

A firm that can effectively price discriminate will charge a higher price to

Accepted Answer

A)  customers who have the more elastic demand for the product. 
B)  customers who have the more inelastic demand for the product. 
C)  buyers who belong to the largest market segment. 
D)  buyers who are members of the smallest market segment. 
A)  customers who have the more elastic demand for the product. 
B)  customers who have the more inelastic demand for the product. 
C)  buyers who belong to the largest market segment. 
D)  buyers who are members of the smallest market segment.

Question 18

According to the law of one price,identical products should sell for the same price everywhere if

Accepted Answer

A)  consumers have knowledge of the prices charged for products in different markets. 
B)  transactions costs are zero. 
C)  firms can prevent consumers from engaging in arbitrage. 
D)  there are no tariffs or other restrictions on imports or exports. 
A)  consumers have knowledge of the prices charged for products in different markets. 
B)  transactions costs are zero. 
C)  firms can prevent consumers from engaging in arbitrage. 
D)  there are no tariffs or other restrictions on imports or exports.

Question 19

Figure 16-3   Chantal owns a hairdressing salon which caters to two main groups of customers: residents of "The Chateau," a retirement community, and other residents in the neighborhood. Figure 16-3 shows the demand curves for the residents of the retirement community, labeled Market A, and other residents in the neighborhood, labeled Market B. The demand curves are not identical.
-Refer to Figure 16-3.Suppose Chantal practices price discrimination.Which of the following statements is true?

Accepted Answer

A)  Chantal's profits will be higher if she has uniform pricing instead of different prices for different groups of customers. 
B)  By charging a higher price in market B, Chantal has transferred some of the consumer surplus from customers in market B to customers in market A. 
C)  By charging different prices in markets A and B, Chantal can transfer some producer surplus into economic profit. 
D)  By charging a higher price in market B, Chantal can convert some consumer surplus into economic profit. 
A)  Chantal's profits will be higher if she has uniform pricing instead of different prices for different groups of customers. 
B)  By charging a higher price in market B, Chantal has transferred some of the consumer surplus from customers in market B to customers in market A. 
C)  By charging different prices in markets A and B, Chantal can transfer some producer surplus into economic profit. 
D)  By charging a higher price in market B, Chantal can convert some consumer surplus into economic profit.

Question 20

Figure 16-6   Watanabe Sensei operates the only martial arts school in Hartfield. For simplicity, assume that consumers have identical demand curves and that Sensei knows what this demand curve is. Figure 16-6 shows this demand curve.
-Refer to Figure 16-6.If Sensei acts as a monopolist and charges the profit-maximizing price,what is the consumer surplus received by his customers?

Accepted Answer

A)  the area A + B + C + D 
B)  the area A + B + C + D + E 
C)  the area A + B 
D)  the area A + C + H 
A)  the area A + B + C + D 
B)  the area A + B + C + D + E 
C)  the area A + B 
D)  the area A + C + H

The Clayton Act of 1936 outlawed price discrimination that reduced competition.

Draw a graph that shows producer surplus,consumer surplus,and deadweight loss in a market where the seller practices perfect price discrimination.Be sure to identify the demand curve,the marginal revenue curve,the marginal cost curve,and the profit maximizing quantity on the graph.

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

Which of the following is not an advantage cost-plus pricing?

A price-discriminating firm charges the highest price to

Perfect price discrimination is also known as

Your text refers to airlines as "The Kings of Price Discrimination." Why is price discrimination common in the airline industry?

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Which of the following is a reason why airline yield management is an effective method to increase revenue?

Consider the following pricing strategies: a.perfect price discrimination b.charging different prices to different groups of customers c.optimal two-part tariff d.single-price monopoly pricing Which of the pricing strategies leads to the economically efficient output level?

With perfect price discrimination there is

Are sellers who practice arbitrage taking advantage of buyers?

A firm that can effectively price discriminate will charge a higher price to

According to the law of one price,identical products should sell for the same price everywhere if

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Exam 16: Pricing Strategy

The Clayton Act of 1936 outlawed price discrimination that reduced competition.

Draw a graph that shows producer surplus,consumer surplus,and deadweight loss in a market where the seller practices perfect price discrimination.Be sure to identify the demand curve,the marginal revenue curve,the marginal cost curve,and the profit maximizing quantity on the graph.

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

Which of the following is not an advantage cost-plus pricing?

A price-discriminating firm charges the highest price to

Perfect price discrimination is also known as

Your text refers to airlines as "The Kings of Price Discrimination." Why is price discrimination common in the airline industry?

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Which of the following is a reason why airline yield management is an effective method to increase revenue?

Consider the following pricing strategies: a.perfect price discrimination b.charging different prices to different groups of customers c.optimal two-part tariff d.single-price monopoly pricing Which of the pricing strategies leads to the economically efficient output level?

With perfect price discrimination there is

Are sellers who practice arbitrage taking advantage of buyers?

A firm that can effectively price discriminate will charge a higher price to

According to the law of one price,identical products should sell for the same price everywhere if

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters