Exam 14: Price Discrimination

Airlines price discriminate by offering both business-class and economy-class service on flights (it's not just the cost of the service that varies; the markup is higher on business class). If they wanted to ensure that everyone who could afford to travel business class did so, what might they do?

The difference between tying and bundling is that tied goods are sold one to one while bundled goods are sold one to many.

Use the following to answer questions: Figure: Monopolist -(Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets-Market A and Market B-if the monopolist were to charge a uniform price of $10 in both markets, how much profit would the monopolist lose?

To maximize profit GlaxoSmithKline sets a higher price for Combivir in Europe than in Africa because the demand curve in Africa is:

Use the following to answer questions: Figure: Price-Discriminating Monopolist 2 -(Figure: Price-Discriminating Monopolist 2) The perfectly price-discriminating monopolist in this diagram will produce _____ units of output, and a single-price monopolist would produce ______ units of output.

Price discrimination is:

To profit maximize, the monopolist should set a higher price in a market with more inelastic demand.

Bundling can increase efficiency when fixed costs are high because the fixed costs are:

Use the following to answer questions: Figure: Monopolist -(Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets-Market A and Market B-through the process of price discrimination, how much profit is the monopolist making in Market B?

Which of the following does NOT practice price discrimination on a regular basis?

The difference between tying and bundling is that:

Figure: Monopoly Profits Refer to the figures. Using the principles of price discrimination, explain and calculate how much profit the monopolist serving these markets could make.

Which of the following conditions would prevent a firm from setting different prices in different markets?

Which of the following is the main principle of price discrimination? I. It is more profitable to set different prices in markets with different demand curves than charge the same price in all markets. II. To maximize profits, firms should charge lower prices in markets with more elastic demands. III. Arbitrage increases the profit opportunities of price discrimination.

An example of price discrimination is charging more for steak than for a hamburger.

Which of the following statements is TRUE?

Price discrimination is:

Use the following to answer questions: Figure: Perfect Price Discrimination -(Figure: Perfect Price Discrimination) Refer to the figure. Which curve represents the marginal revenue (MR) curve for the monopolist who practices perfect price discrimination?

It is better to have a rare disease than an equally severe common one.

Price discrimination is considered bad when: