Exam 14: Price Discrimination

Figure: Two Demand Curves A monopolist sells its output in two markets, each with different demand curves as shown in this figure. If the marginal cost is identical in both markets, the monopolist should charge a ______ price in the inelastic market, represented by the demand curve ______.

Mark has a maximum willingness to pay for Word and Excel of $200 and $30, respectively. Beth has a maximum willingness to pay $50 and $190, respectively. At a bundle price of $230, Mark and Beth receive total consumer surplus of $10.

If two products from a company are designed to perfectly complement each other (in a one-to-many ratio), then the products are:

Which of the following statements is TRUE?

Which of the following statements is TRUE?

On Black Fridays, most retail outlets have major storewide sales. Yet, as one of the busiest shopping days in the United States, one would expect prices to increase, not decrease. Price discrimination explains the answer to this question because price:

Arbitrage is ________ in one market and ________ in another market.

Arbitrage usually makes it ______ for a firm to profitably engage in price discrimination.

Which of the following conditions must be TRUE for perfect price discrimination? I. The seller must have very good information about the buyer's willingness to pay. II. Marginal revenue must equal demand. III. The marginal cost of production must be constant.

The chapter opens with a story about GlaxoSmithKline (GSK) and Combivir, the anti-AIDS drug. What was one of the reasons that GSK was selling Combivir for such low prices in Africa as compared to Europe?

Why is student financial aid a profit-maximizing decision for universities?

Universities are very successful price discriminators.

Which of the following is NOT an example of tying?

Which of the following best explains why people booking airline tickets just prior to their departure dates tend to pay a higher price than those that book a long time in advance?

Many restaurants offer early bird specials to those individuals who come in before 6 P.M. to eat dinner. Explain why restaurants choose to give discounts to those people who come in early to eat. What types of people would you expect to see at the early bird specials? What kind of demand would you suspect they have for dining out?

Price discrimination is defined as selling:

The Gillette Fusion razor sells for approximately $10.00, and a four-set of replacement blades sells for over $8. Which of the following statements is TRUE? I. Consumers with a high willingness to pay for being clean-shaven will buy many replacement blades. II. Consumers with a low willingness to pay for being clean-shaven will rarely buy replacement blades. III. Gillette's high price for the replacement blades is a method to extract consumer surplus from those consumers with a high desire to be clean-shaven.

Total surplus increases with practice of price discrimination only if:

LexisNexis sells ______ access to online periodicals.

Bundling is most likely to be beneficial when fixed costs are ______ and marginal costs are ______.