Exam 14: Price Discrimination

After a severe hurricane in South Carolina, the price of electric generators quadrupled. People living outside of South Carolina purchased electric generators in their home states and drove them to South Carolina to sell at a much higher price. What is this an example of?

If cable television operators did not practice bundling, we would most likely see:

Which of the following regarding the outcome of perfect price discrimination is TRUE?

Perfect price discrimination creates:

GlaxoSmithKline attempts to prevent arbitrage of its drug Combivir by selling different colored pills in special bar-coded packages, to identify and track distributors in different markets.

Which of the following would be an effective method for firms to ensure profit from price discrimination when the possibility of arbitrage exists?

Tying is:

Although price discrimination may increase the profits of drug companies, it reduces the incentive for drug companies to develop new drugs.

Use the following to answer questions: Figure: Price-Discriminating Monopolist -(Figure: Price-Discriminating Monopolist) Refer to the figure. In order to maximize profits, the monopolist should charge a:

A firm has two markets-A and B. In Market A, demand is given by the equation P = 50 - 2Q, and marginal revenue (MR) is given by the equation MR = 50 - 4Q. In Market B, the demand equation is P = 82 - 4Q, and the marginal revenue equation is MR = 82 - 8Q. Marginal and average cost equal $2 in both markets. a. If the firm decides to price discriminate, what price would it charge in each market? b. What is the profit-maximizing quantity in each market? c. How much profit would it make in each market?

An important lesson of price discrimination is that:

Williams College used ________ as a means to ________.

Arbitrage makes it easier for a firm to set different prices in different markets.

Explain how firms practice tying and bundling, and specify the difference between the two pricing schemes.

Universities are ______ price discrimination.

Merit scholarships not only allow universities to attract the most talented students, but to also practice price discrimination since meritorious students:

Perfectly price-discriminating monopolists charge:

Imagine a technology that enabled people to sell part of the contents of their brains directly (assume that the seller does not get to keep a copy of the contents). Why might this make price discrimination for college education more difficult?

In the case of a perfectly price-discriminating monopolist, the price of the last unit sold:

Arbitrage is the act of buying at a low price and selling at a high price, which makes the practice of price discrimination even more profitable.