Question 1

Senior citizens tend to have a more elastic demand for movie theatre tickets, and thus typically pay a lower price.

Accepted Answer

A) True 
 B)False  False

Question 2

Microsoft Word and Microsoft Excel are typically:

Accepted Answer

A)  tied. 
B)  bundled. 
C)  aggregated. 
D)  separated. 
A)  tied. 
B)  bundled. 
C)  aggregated. 
D)  separated. B

Question 3

Perfect price discrimination results in:

Accepted Answer

A)  marginal revenue being in excess of the price charged for the good. 
B)  zero dollars of consumer surplus. 
C)  maximization of consumer surplus. 
D)  marginal revenue becoming equal to the marginal cost of the product for every unit sold. 
A)  marginal revenue being in excess of the price charged for the good. 
B)  zero dollars of consumer surplus. 
C)  maximization of consumer surplus. 
D)  marginal revenue becoming equal to the marginal cost of the product for every unit sold. B

Question 4

Arbitrage prevention is:

Accepted Answer

A)  always easy to achieve. 
B)  not necessary to practice price discrimination. 
C)  easier in the case of selling services. 
D)  easier in the case of selling goods. 
A)  always easy to achieve. 
B)  not necessary to practice price discrimination. 
C)  easier in the case of selling services. 
D)  easier in the case of selling goods.

Question 5

Price discrimination is good if output:

Accepted Answer

A)  falls under price discrimination. 
B)  stays the same under price discrimination. 
C)  increases under price discrimination. 
D)  is no longer produced under price discrimination. 
A)  falls under price discrimination. 
B)  stays the same under price discrimination. 
C)  increases under price discrimination. 
D)  is no longer produced under price discrimination.

Question 6

Use the following to answer questions:
Figure: Price-Discriminating Monopolist 2  
-(Figure: Price-Discriminating Monopolist 2) Consumer surplus with a single-price monopoly is ______, and consumer surplus with a perfect price discrimination is ______.

Accepted Answer

A)  $12; $4 
B)  $6; $0 
C)  $14; $10 
D)  $8; $0 
A)  $12; $4 
B)  $6; $0 
C)  $14; $10 
D)  $8; $0

Question 7

Figure: Canada & Europe    
A monopolist sells its output in two markets: Canada and Europe, as shown in these figures. To maximize profits, the monopolist should:

Accepted Answer

A)  set a price of $10 in both markets. 
B)  set a price of $10 in Canada and $7.50 in Europe. 
C)  set a price equal to $5, or marginal cost, in Canada and Europe. 
D)  sell 20 units in Canada and 10 units in Europe. 
A)  set a price of $10 in both markets. 
B)  set a price of $10 in Canada and $7.50 in Europe. 
C)  set a price equal to $5, or marginal cost, in Canada and Europe. 
D)  sell 20 units in Canada and 10 units in Europe.

Question 8

Which of the following does NOT represent a benefit that can be achieved from bundling?

Accepted Answer

A)  spreading of fixed costs across greater number of units 
B)  increased incentive to innovate 
C)  increased profit 
D)  setting of bundle prices that are lower than individual unit prices 
A)  spreading of fixed costs across greater number of units 
B)  increased incentive to innovate 
C)  increased profit 
D)  setting of bundle prices that are lower than individual unit prices

Question 9

A perfect price-discriminating seller:

Accepted Answer

A)  cannot prevent arbitrage. 
B)  charges a single price. 
C)  maximizes consumer surplus. 
D)  eliminates deadweight loss. 
A)  cannot prevent arbitrage. 
B)  charges a single price. 
C)  maximizes consumer surplus. 
D)  eliminates deadweight loss.

Question 10

If a monopolist is able to perfectly price discriminate, then:

Accepted Answer

A)  they will be able to charge every consumer a price equal to their marginal cost of production. 
B)  arbitrage will not exist. 
C)  prices will fall for those individuals with very inelastic demands. 
D)  there will be zero deadweight loss to society. 
A)  they will be able to charge every consumer a price equal to their marginal cost of production. 
B)  arbitrage will not exist. 
C)  prices will fall for those individuals with very inelastic demands. 
D)  there will be zero deadweight loss to society.

Question 11

The more a firm knows about ________ the easier it is for the firm to ________.

Accepted Answer

A)  competitors; advertise 
B)  costs; sell its goods 
C)  supply; price discriminate 
D)  demand; price discriminate 
A)  competitors; advertise 
B)  costs; sell its goods 
C)  supply; price discriminate 
D)  demand; price discriminate

Question 12

Which of the following best explains why it is so difficult for firms to perfectly price discriminate?

Accepted Answer

A)  It is illegal. 
B)  It is very difficult to know exactly every consumer's willingness to pay. 
C)  It is difficult to measure the marginal cost of producing an additional unit. 
D)  Perfect price discrimination often lowers the overall profits of a monopolist. 
A)  It is illegal. 
B)  It is very difficult to know exactly every consumer's willingness to pay. 
C)  It is difficult to measure the marginal cost of producing an additional unit. 
D)  Perfect price discrimination often lowers the overall profits of a monopolist.

Question 13

If cable TV packages were unbundled, the price per channel would rise.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that the government made it legal to submit false tax returns on college aid applications. What do you predict would happen to the price of attending college?

Accepted Answer

A)  Everyone would pay the price now paid by the poorest students. 
B)  Wealthy students would pay less, and poor students would pay more. 
C)  Wealthy students would pay more, and poor students would pay less. 
D)  Everyone would pay the price now paid by the wealthiest students. 
A)  Everyone would pay the price now paid by the poorest students. 
B)  Wealthy students would pay less, and poor students would pay more. 
C)  Wealthy students would pay more, and poor students would pay less. 
D)  Everyone would pay the price now paid by the wealthiest students.

Question 15

Which of the following statements is TRUE regarding arbitrage?

Accepted Answer

A)  It is easier to prevent arbitrage for some products than for others. 
B)  The U.S. Constitution prevents the government from engaging in arbitrage prevention. 
C)  Arbitrage may increase the profits for firms, depending on the elasticity of demand in the market. 
D)  Firms will still be able to price discriminate across markets even when arbitrage is present. 
A)  It is easier to prevent arbitrage for some products than for others. 
B)  The U.S. Constitution prevents the government from engaging in arbitrage prevention. 
C)  Arbitrage may increase the profits for firms, depending on the elasticity of demand in the market. 
D)  Firms will still be able to price discriminate across markets even when arbitrage is present.

Question 16

Which of the following is an example of price discrimination?

Accepted Answer

A)  value meals at fast-food restaurants 
B)  senior citizen discounts 
C)  tax-exempt status for nonprofit organizations 
D)  holiday sales at retail stores 
A)  value meals at fast-food restaurants 
B)  senior citizen discounts 
C)  tax-exempt status for nonprofit organizations 
D)  holiday sales at retail stores

Question 17

Suppose that there are four consumers whose maximum willingnesses to pay for a good are $20, $15, $8, and $4, respectively. A firm can produce and sell the good at a constant marginal cost of $6. If the firm practiced perfect price discrimination, its total revenues would equal:

Accepted Answer

A)  $18. 
B)  $24. 
C)  $43. 
D)  $47. 
A)  $18. 
B)  $24. 
C)  $43. 
D)  $47.

Question 18

Which of the following is an example of price discrimination through tying?

Accepted Answer

A)  combo meals at fast food restaurants 
B)  Barbie and Ken dolls 
C)  razors and blades 
D)  lights and light bulbs 
A)  combo meals at fast food restaurants 
B)  Barbie and Ken dolls 
C)  razors and blades 
D)  lights and light bulbs

Question 19

A subtle form of price discrimination is for firms to offer:

Accepted Answer

A)  the same version of a product for the purpose of separating customers into different markets. 
B)  the same version of a product for the purpose of separating customers into the same market. 
C)  different versions of a product for the purpose of separating customers into different markets. 
D)  different versions of a product for the purpose of separating customers into the same market. 
A)  the same version of a product for the purpose of separating customers into different markets. 
B)  the same version of a product for the purpose of separating customers into the same market. 
C)  different versions of a product for the purpose of separating customers into different markets. 
D)  different versions of a product for the purpose of separating customers into the same market.

Question 20

Tying is an example of price discrimination in which customers must buy a second product from the same firm that sold the first product.

Accepted Answer

A) True 
 B)False

Exam 14: Price Discrimination

Senior citizens tend to have a more elastic demand for movie theatre tickets, and thus typically pay a lower price.

Microsoft Word and Microsoft Excel are typically:

Perfect price discrimination results in:

Arbitrage prevention is:

Price discrimination is good if output:

Use the following to answer questions: Figure: Price-Discriminating Monopolist 2 -(Figure: Price-Discriminating Monopolist 2) Consumer surplus with a single-price monopoly is ______, and consumer surplus with a perfect price discrimination is ______.

Figure: Canada & Europe A monopolist sells its output in two markets: Canada and Europe, as shown in these figures. To maximize profits, the monopolist should:

Which of the following does NOT represent a benefit that can be achieved from bundling?

A perfect price-discriminating seller:

If a monopolist is able to perfectly price discriminate, then:

The more a firm knows about ________ the easier it is for the firm to ________.

Which of the following best explains why it is so difficult for firms to perfectly price discriminate?

If cable TV packages were unbundled, the price per channel would rise.

Suppose that the government made it legal to submit false tax returns on college aid applications. What do you predict would happen to the price of attending college?

Which of the following statements is TRUE regarding arbitrage?

Which of the following is an example of price discrimination?

Suppose that there are four consumers whose maximum willingnesses to pay for a good are $20, $15, $8, and $4, respectively. A firm can produce and sell the good at a constant marginal cost of $6. If the firm practiced perfect price discrimination, its total revenues would equal:

Which of the following is an example of price discrimination through tying?

A subtle form of price discrimination is for firms to offer:

Tying is an example of price discrimination in which customers must buy a second product from the same firm that sold the first product.

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

Use the following to answer questions: Figure: Price-Discriminating Monopolist 2 -(Figure: Price-Discriminating Monopolist 2) Consumer surplus with a single-price monopoly is , and consumer surplus with a perfect price discrimination is .

The more a firm knows about the easier it is for the firm to .