Question 1

Why might a producer practice price discrimination?

Accepted Answer

A)  to make its products more affordable to those with low incomes 
B)  to maximize economic efficiency 
C)  to maximize profits 
D)  to maximize quantity demanded 
A)  to make its products more affordable to those with low incomes 
B)  to maximize economic efficiency 
C)  to maximize profits 
D)  to maximize quantity demanded

Question 2

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.Suppose instead of charging the monopoly price for his classes,Sensei charges the competitive price.What is the competitive price and what is the quantity demanded at this price?

Accepted Answer

A)  P0, Q1 
B)  P0, Q0 
C)  P1, Q0 
D)  P1, Q1 
A)  P0, Q1 
B)  P0, Q0 
C)  P1, Q0 
D)  P1, Q1

Question 3

For many products,such as fast foods,a variety of prices can be found,but sellers with higher prices can expect to sell their products because

Accepted Answer

A)  consumers are not sensitive to prices. 
B)  arbitrage will quickly eliminate price differences. 
C)  firms differentiate products in many ways, for example, higher priced fast food restaurants may offer better service. 
D)  their demand is perfectly inelastic. 
A)  consumers are not sensitive to prices. 
B)  arbitrage will quickly eliminate price differences. 
C)  firms differentiate products in many ways, for example, higher priced fast food restaurants may offer better service. 
D)  their demand is perfectly inelastic.

Question 4

Suppose a restaurant is trying to determine how much to charge for a bowl of chili,and decides to run an experiment to see how much its customers are willing to pay by allowing them to set their own price for this menu item.
a.Is charging a customer the price he or she is willing to pay for the bowl of chili an example of price discrimination? Briefly explain.
b.What is it called when a firm knows every consumer's willingness to pay,and can charge every consumer a different price? What happens to consumer surplus in this situation?

Accepted Answer

a.This is an example of price discrimina

Question 5

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

Accepted Answer

A price taker has no market power and th

Question 6

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,his profit-maximizing price is ________ and the number of classes sold is ________.

Accepted Answer

A)  P0; Q0 
B)  P0; Q1 
C)  P1; Q0 
D)  P1; Q1 
A)  P0; Q0 
B)  P0; Q1 
C)  P1; Q0 
D)  P1; Q1

Question 7

Firms engage in odd pricing when they charge prices that appear to be less than they really are; for example,charging a price of $4.95 instead of $5.00 and $.99 instead of $1.00.How have researchers tried to determine whether odd pricing is successful in convincing consumers that odd prices are less than they really are?

Accepted Answer

Three researchers used surveys to answer

Question 8

A two-part tariff refers to a pricing schedule under which a buyer must pay a fixed fee for the right to purchase the product,in addition to a per-unit price.

Accepted Answer

A) True 
 B)False

Question 9

What is meant by the "law of one price"?

Accepted Answer

A)  Identical products should sell for the same price everywhere. 
B)  A law was passed in 1913 that made it illegal to sell the same good or service to different people for different prices. 
C)  This is a section of the Sherman Act that forced trusts (for example, the Standard Oil Company) to charge the same price for the same good or service in different states. 
D)  Foreign companies should not be allowed to sell a product in the United States for prices different from prices these companies charge in other countries. 
A)  Identical products should sell for the same price everywhere. 
B)  A law was passed in 1913 that made it illegal to sell the same good or service to different people for different prices. 
C)  This is a section of the Sherman Act that forced trusts (for example, the Standard Oil Company) to charge the same price for the same good or service in different states. 
D)  Foreign companies should not be allowed to sell a product in the United States for prices different from prices these companies charge in other countries.

Question 10

What is odd pricing? Why do some merchants use odd pricing?

Accepted Answer

Odd pricing is the practice of charging

Question 11

What is yield management? How is yield management being used in the airline industry?

Accepted Answer

Yield management is the use of sophistic

Question 12

Differentiating products to suit customers' tastes is a form of price discrimination.

Accepted Answer

A) True 
 B)False

Question 13

Assume that a monopolist practices perfect price discrimination.The firm will produce an output rate

Accepted Answer

A)  that is less than the efficient level of output. 
B)  that is greater than the efficient level of output. 
C)  that is equal to the efficient level of output. 
D)  that converts consumers surplus into a deadweight loss. 
A)  that is less than the efficient level of output. 
B)  that is greater than the efficient level of output. 
C)  that is equal to the efficient level of output. 
D)  that converts consumers surplus into a deadweight loss.

Question 14

Under what circumstances will the law of one price hold,and when might it not hold?

Accepted Answer

When arbitrage can easily occu

Question 15

There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.

Accepted Answer

A) True 
 B)False

Question 16

When Disneyland opened in 1955,what prices were charged for admission and rides?

Accepted Answer

A)  Admission was free; customers paid for rides. 
B)  All customers paid the same price for admission; rides were free. 
C)  Admission prices varied by your age, home address and occupation; rides were free. 
D)  All customers paid the same low price for admission; customers were also charged prices for rides. 
A)  Admission was free; customers paid for rides. 
B)  All customers paid the same price for admission; rides were free. 
C)  Admission prices varied by your age, home address and occupation; rides were free. 
D)  All customers paid the same low price for admission; customers were also charged prices for rides.

Question 17

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

Accepted Answer

A)  clothing items sold through Macy's Department Store 
B)  a hamburger sold at Burger King 
C)  a cafe latte sold at Starbucks 
D)  tickets to matinee shows at a movie theatre 
A)  clothing items sold through Macy's Department Store 
B)  a hamburger sold at Burger King 
C)  a cafe latte sold at Starbucks 
D)  tickets to matinee shows at a movie theatre

Question 18

If,at the firm's projected sales level,the marginal cost is $40,the average cost is $50 and the markup is 30 percent,then its selling price is

Accepted Answer

A)  $40. 
B)  $50. 
C)  $52. 
D)  $65. 
A)  $40. 
B)  $50. 
C)  $52. 
D)  $65.

Question 19

Which of the following statements about two-part tariffs is false?

Accepted Answer

A)  Because each individual has a different individual demand curve, if there is just one entrance fee some consumers will be able to reap some consumer surplus. 
B)  The producer cannot capture the entire consumer surplus because the entrance fee might discourage some potential consumers even though they would have been willing to pay a lesser entrance fee. 
C)  Two-part tariff pricing allows a producer to capture the entire consumer surplus. 
D)  For two-part tariff pricing to be successful, the producer must be able to identify two distinct customer groups. 
A)  Because each individual has a different individual demand curve, if there is just one entrance fee some consumers will be able to reap some consumer surplus. 
B)  The producer cannot capture the entire consumer surplus because the entrance fee might discourage some potential consumers even though they would have been willing to pay a lesser entrance fee. 
C)  Two-part tariff pricing allows a producer to capture the entire consumer surplus. 
D)  For two-part tariff pricing to be successful, the producer must be able to identify two distinct customer groups.

Question 20

Table 16-2
   Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube.
-Refer to Table 16-2.Which of the following statements is true about the two markets?

Accepted Answer

A)  The demand in Middle Fall is more price elastic than the demand in West Fall. 
B)  The demand in Middle Fall is less price elastic than the demand in West Fall. 
C)  The demand in Middle Fall is more income elastic than the demand in West Fall. 
D)  The demand in Middle Fall is less income elastic than the demand in West Fall. 
A)  The demand in Middle Fall is more price elastic than the demand in West Fall. 
B)  The demand in Middle Fall is less price elastic than the demand in West Fall. 
C)  The demand in Middle Fall is more income elastic than the demand in West Fall. 
D)  The demand in Middle Fall is less income elastic than the demand in West Fall.

Why might a producer practice price discrimination?

For many products,such as fast foods,a variety of prices can be found,but sellers with higher prices can expect to sell their products because

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

A two-part tariff refers to a pricing schedule under which a buyer must pay a fixed fee for the right to purchase the product,in addition to a per-unit price.

What is meant by the "law of one price"?

What is odd pricing? Why do some merchants use odd pricing?

What is yield management? How is yield management being used in the airline industry?

Differentiating products to suit customers' tastes is a form of price discrimination.

Assume that a monopolist practices perfect price discrimination.The firm will produce an output rate

Under what circumstances will the law of one price hold,and when might it not hold?

There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.

When Disneyland opened in 1955,what prices were charged for admission and rides?

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

If,at the firm's projected sales level,the marginal cost is $40,the average cost is $50 and the markup is 30 percent,then its selling price is

Which of the following statements about two-part tariffs is false?

Table 16-2 Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube. -Refer to Table 16-2.Which of the following statements is true about the two markets?

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

Why might a producer practice price discrimination?

For many products,such as fast foods,a variety of prices can be found,but sellers with higher prices can expect to sell their products because

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

A two-part tariff refers to a pricing schedule under which a buyer must pay a fixed fee for the right to purchase the product,in addition to a per-unit price.

What is meant by the "law of one price"?

What is odd pricing? Why do some merchants use odd pricing?

What is yield management? How is yield management being used in the airline industry?

Differentiating products to suit customers' tastes is a form of price discrimination.

Assume that a monopolist practices perfect price discrimination.The firm will produce an output rate

Under what circumstances will the law of one price hold,and when might it not hold?

There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.

When Disneyland opened in 1955,what prices were charged for admission and rides?

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

If,at the firm's projected sales level,the marginal cost is $40,the average cost is $50 and the markup is 30 percent,then its selling price is

Which of the following statements about two-part tariffs is false?

Table 16-2 Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube. -Refer to Table 16-2.Which of the following statements is true about the two markets?

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