Question 1

A successful strategy of price discrimination requires that a firm be a price-taker.

Accepted Answer

A) True 
 B)False

Question 2

Figure 16-5  
-Refer to Figure 16-5.Consider the following two pricing strategies: 
a. a fixed fee and a per-unit price equal to the monopoly price
b. a fixed fee and a per-unit price equal to the competitive price
The firm represented in the diagram earns a higher profit under strategy ________ and deadweight loss is eliminated under ________.

Accepted Answer

A)  b; b 
B)  a; b 
C)  a; neither strategy 
D)  b; neither strategy 
A)  b; b 
B)  a; b 
C)  a; neither strategy 
D)  b; neither strategy

Question 3

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.Sensei's friend,Marcel,suggests that he charge a one-time membership fee to use the martial arts school,in addition to a per-class charge.Suppose Sensei charges the monopoly price for each class and also imposes a one-time membership fee.What is the maximum amount of revenue from the membership fee he can collect from all his customers?

Accepted Answer

A)  an amount equal to the area A + B 
B)  an amount equal to the area E + F 
C)  an amount equal to the area H + G 
D)  an amount equal to the area A + C + H 
A)  an amount equal to the area A + B 
B)  an amount equal to the area E + F 
C)  an amount equal to the area H + G 
D)  an amount equal to the area A + C + H

Question 4

The law of one price holds exactly only if

Accepted Answer

A)  antitrust laws are being enforced. 
B)  buyers have complete information. 
C)  transactions costs are zero. 
D)  it is impossible for buyers to resell the good. 
A)  antitrust laws are being enforced. 
B)  buyers have complete information. 
C)  transactions costs are zero. 
D)  it is impossible for buyers to resell the good.

Question 5

Which of the following undermines a firm's ability to engage in price discrimination?

Accepted Answer

A)  the seller's market power 
B)  the inability to prevent resale of the product from one market segment to another 
C)  buyers having different elasticities of demand for the product 
D)  the seller's ability to segment the total market 
A)  the seller's market power 
B)  the inability to prevent resale of the product from one market segment to another 
C)  buyers having different elasticities of demand for the product 
D)  the seller's ability to segment the total market

Question 6

Book publishers often use a cost-plus pricing strategy.One reason for this is

Accepted Answer

A)  most publishers do not hire economists who can determine the number of books they must sell to equate marginal cost and marginal revenue. 
B)  publishers do not want to incur the expense of determining the profit-maximizing strategy. They prefer cost-plus pricing because of its lower cost. 
C)  much of the cost of publishing textbooks is difficult to assign to any particular book. 
D)  bookstores, not publishers, ultimately determine how many books will be produced. 
A)  most publishers do not hire economists who can determine the number of books they must sell to equate marginal cost and marginal revenue. 
B)  publishers do not want to incur the expense of determining the profit-maximizing strategy. They prefer cost-plus pricing because of its lower cost. 
C)  much of the cost of publishing textbooks is difficult to assign to any particular book. 
D)  bookstores, not publishers, ultimately determine how many books will be produced.

Question 7

What is the difference between price discrimination and other forms of discrimination?

Accepted Answer

Discrimination based on race or gender a

Question 8

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1,200.Assume that Iris and Daphne do not know each other.If the price is $500 per copy

Accepted Answer

A)  only Iris will purchase Joss's services and Joss will undertake the job for her. 
B)  only Daphne will purchase Joss's services and Joss will undertake the job for her. 
C)  both Iris and Daphne will purchase Joss's services and Joss will undertake the job. 
D)  both Iris and Daphne will want to purchase Joss's services but Joss will not be willing to undertake the job. 
A)  only Iris will purchase Joss's services and Joss will undertake the job for her. 
B)  only Daphne will purchase Joss's services and Joss will undertake the job for her. 
C)  both Iris and Daphne will purchase Joss's services and Joss will undertake the job. 
D)  both Iris and Daphne will want to purchase Joss's services but Joss will not be willing to undertake the job.

Question 9

Dell Computers allows potential consumers to customize personal computers to their desires.Dell's strategy is successful because offering bundles that more exactly meets a consumer's preference allows Dell to extract more consumer surplus.

Accepted Answer

A) True 
 B)False

Question 10

Compared to monopoly pricing,an optimal two-part tariff

Accepted Answer

A)  reduces economic efficiency. 
B)  eliminates the deadweight loss. 
C)  equates marginal revenue and average revenue. 
D)  increases consumer surplus. 
A)  reduces economic efficiency. 
B)  eliminates the deadweight loss. 
C)  equates marginal revenue and average revenue. 
D)  increases consumer surplus.

Question 11

If the selling price of a firm's product is $200 and the estimated average cost of producing this product is $150,what is the firm's markup?

Accepted Answer

A)  75 percent 
B)  33.33 percent 
C)  25 percent 
D)  impossible to determine with the information given 
A)  75 percent 
B)  33.33 percent 
C)  25 percent 
D)  impossible to determine with the information given

Question 12

Buying at a low price in one market and reselling at a higher price in another market will

Accepted Answer

A)  not generate any profit because of transportation costs. 
B)  not generate any profit because of transactions costs. 
C)  eventually eliminate all of the price differences. 
D)  eventually eliminate most, but not necessarily all, of the price differences. 
A)  not generate any profit because of transportation costs. 
B)  not generate any profit because of transactions costs. 
C)  eventually eliminate all of the price differences. 
D)  eventually eliminate most, but not necessarily all, of the price differences.

Question 13

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

Accepted Answer

A)  odd pricing. 
B)  dual pricing. 
C)  a two-part tariff. 
D)  intertemporal pricing. 
A)  odd pricing. 
B)  dual pricing. 
C)  a two-part tariff. 
D)  intertemporal pricing.

Question 14

Why might an amusement park switch from charging admission to the park and charging for the rides to charging for admission but not charging for the rides?

Accepted Answer

An amusement park would switch pricing s

Question 15

From an economic perspective,price discrimination is desirable because

Accepted Answer

A)  the increase in profits is more than offset by the loss in consumer surplus, resulting in a net increase in economic surplus. 
B)  it enables firms to increase profits with no loss in economic surplus, and in turn, this could provide firms with incentives to engage in beneficial product innovation. 
C)  the increase in profits results in higher corporate tax revenues received by the government which could be used to subsidize consumption for low-income individuals. 
D)  it redistributes wealth from wealthy consumers to highly innovative firms. 
A)  the increase in profits is more than offset by the loss in consumer surplus, resulting in a net increase in economic surplus. 
B)  it enables firms to increase profits with no loss in economic surplus, and in turn, this could provide firms with incentives to engage in beneficial product innovation. 
C)  the increase in profits results in higher corporate tax revenues received by the government which could be used to subsidize consumption for low-income individuals. 
D)  it redistributes wealth from wealthy consumers to highly innovative firms.

Question 16

Early adopters are consumers who will pay a high price to be among the first to own new products.

Accepted Answer

A) True 
 B)False

Question 17

Most supermarkets charge the same price for the majority of goods sold.This suggest that

Accepted Answer

A)  the government regulates prices of most products sold in supermarkets. 
B)  supermarkets have colluded to fix prices on most of the goods sold. 
C)  mark-ups reflect the degree of competition in the supermarket industry. 
D)  the large supermarket chains are price leaders and smaller grocers take these prices as given. 
A)  the government regulates prices of most products sold in supermarkets. 
B)  supermarkets have colluded to fix prices on most of the goods sold. 
C)  mark-ups reflect the degree of competition in the supermarket industry. 
D)  the large supermarket chains are price leaders and smaller grocers take these prices as given.

Question 18

Consumers who will pay high prices to be among the first to own certain new products are called

Accepted Answer

A)  savvy consumers. 
B)  naive consumers. 
C)  gullible. 
D)  early adopters. 
A)  savvy consumers. 
B)  naive consumers. 
C)  gullible. 
D)  early adopters.

Question 19

Most movie theatres charge different prices to different groups of customers for movie admission but not on movie popcorn.Which of the following is a reason for this?

Accepted Answer

A)  because the markup on movie popcorn is very high and movie theatres do not want to forego this source of revenue 
B)  because the demand for popcorn is very high relative to the demand for movie admissions 
C)  because it is easier to limit resale in movie admissions but not in popcorn 
D)  because the cost of operating a concession stand in a movie theatre is very high compared to the cost of showing a movie 
A)  because the markup on movie popcorn is very high and movie theatres do not want to forego this source of revenue 
B)  because the demand for popcorn is very high relative to the demand for movie admissions 
C)  because it is easier to limit resale in movie admissions but not in popcorn 
D)  because the cost of operating a concession stand in a movie theatre is very high compared to the cost of showing a movie

Question 20

In a perfectly competitive market,in the long run,arbitrage profits will be bid away.

Accepted Answer

A) True 
 B)False

A successful strategy of price discrimination requires that a firm be a price-taker.

The law of one price holds exactly only if

Which of the following undermines a firm's ability to engage in price discrimination?

Book publishers often use a cost-plus pricing strategy.One reason for this is

What is the difference between price discrimination and other forms of discrimination?

Dell Computers allows potential consumers to customize personal computers to their desires.Dell's strategy is successful because offering bundles that more exactly meets a consumer's preference allows Dell to extract more consumer surplus.

Compared to monopoly pricing,an optimal two-part tariff

If the selling price of a firm's product is $200 and the estimated average cost of producing this product is $150,what is the firm's markup?

Buying at a low price in one market and reselling at a higher price in another market will

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

Why might an amusement park switch from charging admission to the park and charging for the rides to charging for admission but not charging for the rides?

From an economic perspective,price discrimination is desirable because

Early adopters are consumers who will pay a high price to be among the first to own new products.

Most supermarkets charge the same price for the majority of goods sold.This suggest that

Consumers who will pay high prices to be among the first to own certain new products are called

Most movie theatres charge different prices to different groups of customers for movie admission but not on movie popcorn.Which of the following is a reason for this?

In a perfectly competitive market,in the long run,arbitrage profits will be bid away.

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

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Exam 16: Pricing Strategy

A successful strategy of price discrimination requires that a firm be a price-taker.

The law of one price holds exactly only if

Which of the following undermines a firm's ability to engage in price discrimination?

Book publishers often use a cost-plus pricing strategy.One reason for this is

What is the difference between price discrimination and other forms of discrimination?

Dell Computers allows potential consumers to customize personal computers to their desires.Dell's strategy is successful because offering bundles that more exactly meets a consumer's preference allows Dell to extract more consumer surplus.

Compared to monopoly pricing,an optimal two-part tariff

If the selling price of a firm's product is $200 and the estimated average cost of producing this product is $150,what is the firm's markup?

Buying at a low price in one market and reselling at a higher price in another market will

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

Why might an amusement park switch from charging admission to the park and charging for the rides to charging for admission but not charging for the rides?

From an economic perspective,price discrimination is desirable because

Early adopters are consumers who will pay a high price to be among the first to own new products.

Most supermarkets charge the same price for the majority of goods sold.This suggest that

Consumers who will pay high prices to be among the first to own certain new products are called

Most movie theatres charge different prices to different groups of customers for movie admission but not on movie popcorn.Which of the following is a reason for this?

In a perfectly competitive market,in the long run,arbitrage profits will be bid away.

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