Question 1

The Toronto Maple Leafs were offering hockey fans the chance to purchase equity seat rights in order to guarantee season ticket seats and prices for home games.This is an example of

Accepted Answer

A) odd pricing. 
B) cost-plus pricing. 
C) two-part tariff pricing. 
D) the law of one price.

Question 2

Consider three pricing strategies that the firm can pursue:
a)optimal two-part tariff pricing
b)perfect price discrimination
c)single-price monopoly pricing
Of these three strategies, which is most beneficial to society as a whole?

Accepted Answer

A) Both perfect price discrimination and a two-part tariff pricing are equally beneficial in that the marginal benefit of the last unit sold equals the marginal cost of producing that unit. 
B) only perfect price discrimination because this pricing method eliminates deadweight loss 
C) single-price monopoly pricing because consumers enjoy at least some consumer surplus 
D) only two-part tariff pricing because the per-unit portion of the price is set equal to marginal cost

Question 3

Both first-degree price discrimination and optimal two-part tariff pricing maximize economic surplus.

Accepted Answer

A) True 
 B)False

Question 4

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.

Question 5

Yield management is the practice of

Accepted Answer

A) determining production functions to minimize production costs. 
B) forecasting competitors' responses to price changes. 
C) using buyer data to rapidly adjust prices. 
D) using information technology to find the best interest rate.

Question 6

Figure 16.4
 
-Refer to Figure 16.4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the profit earned under this pricing scheme?

Accepted Answer

A) $5,760 
B) $6,400 
C) $7,680 
D) $7,870

Question 7

If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations, then it is engaging in

Accepted Answer

A) odd pricing. 
B) cost-plus pricing. 
C) price discrimination. 
D) markup pricing.

Question 8

Price discrimination became legal in Canada in

Accepted Answer

A) 2004. 
B) 1993. 
C) 2009. 
D) 1930.

Question 9

What is odd pricing? Why do some merchants use odd pricing?

Accepted Answer

The answer of What is odd pricing? Why do some...

Question 10

Which of the following is not an advantage cost-plus pricing?

Accepted Answer

A) It leads to profit maximization. 
B) It is an easy method to implement if a firm produces multiple products and has overhead costs that are difficult to allocate to a particular good. 
C) It could lead to price stability if the industry is made up of identical firms all using the same method of pricing. 
D) It is easy to justify price increases when total costs of production increase.

Question 11

Some consumer electronic products such as plasma TVs, DVD players and digital cameras, are introduced at very high prices but over time, their prices start falling (beyond what could be attributed to falling costs as companies take advantage of economies of scale and cheaper technologies).Which of the following is the best explanation for this observation?

Accepted Answer

A) More firms are likely to enter the consumer electronic market over time, forcing market prices down. 
B) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait. 
C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods. 
D) After satisfying the demand for early adopters, firms lower price to attract the more price sensitive consumers.

Question 12

In January of 2014, Rogers cable was offering new customers cable TV, internet access, and a PVR, for $19.95 a month.Renting just a PVR from Roger's would cost existing customers $25.07 a month.What can you conclude about the price elasticity of demand for Rogers cable TV, internet access, and PVR rental?

Accepted Answer

A) Existing subscribers likely have more elastic demand than potential new subscribers. 
B) Existing subscribers are likely to have less elastic demand than potential new subscribers. 
C) Existing subscribers are likely to view cable TV and internet as substitutions and thus not be interested in this bundle. 
D) New subscribers are the only ones likely to view TV and internet as complements.

Question 13

Successful price discrimination cannot take place if

Accepted Answer

A) the market is perfectly competitive. 
B) the market can be segmented into different buyer groups. 
C) customers are not able to resell the product. 
D) the demand curve facing the firm is downward-sloping.

Question 14

Why is price discrimination legal but not discrimination based on race or gender?

Accepted Answer

A) because price discrimination increases profits and therefore tax revenues for the government, but discrimination based on race or gender reduces tax revenues 
B) because price discrimination reduces deadweight loss, but discrimination based on race or gender increases deadweight loss 
C) because price discrimination involves charging people different prices based on their willingness to pay rather than on the basis of arbitrary characteristics 
D) because price discrimination enables firms to increase output and employment, but race or gender based discrimination reduces employment

Question 15

What is perfect price discrimination and why do economists believe that no firm is able to practice perfect price discrimination?

Accepted Answer

The answer of What is perfect price discrimination and why...

Question 16

Figure 16.4
 
-Refer to Figure 16.4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the competitive price.(This is also called an optimal two-part tariff.)What is the per-unit price it should charge, if any?

Accepted Answer

A) It should not charge a price per unit; just a flat fee to consume as much of the product as desired. 
B) It should charge a range of prices from $40 to $12. 
C) $12 
D) $16

Question 17

If demand is taken into account, firms that use cost-plus pricing can adjust price by

Accepted Answer

A) letting sales fall, but hold the markup constant if demand falls. 
B) lowering markups on price-elastic goods and raising markups on price-inelastic goods. 
C) raising markups on price-elastic goods and lowering markups on price-inelastic goods. 
D) letting sales rise, but hold the markup constant if demand rises.

Question 18

In January of 2014, Rogers cable was offering new customers cable TV, internet access, and a PVR, for $19.95 a month.Renting just a PVR from Roger's would cost existing customers $25.07 a month.Is Rogers engaging in price discrimination, and if so, why?

Accepted Answer

A) No, it is not; it is merely differentiating its product by offering different levels of service. 
B) No, it is not. Its decision to give priority to new customers is a business strategy independent of pricing. 
C) Yes it is; Rogers is charging different prices for the same service. It does this to increase its profit. 
D) Yes it is; Rogers wants to discourage those existing customers from watching too much TV because they lower the firm's profits.

Question 19

Figure 16.2
  
Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population. Figure 16.2 shows the demand curves for the two groups of customers.
-Refer to Figure 16.2.What is the price charged in the two markets?

Accepted Answer

A) price in the student market = price in the non-student market = Pₐ 
B) price in the student market = price in the non-student market = Pb 
C) price in the student market = Pd; price in the non-student market = Pₑ 
D) price in the student market = Pc; price in the non-student market = Pₑ

Question 20

If universities were to use yield management techniques, they would increase scholarship offers to students likely to be more price sensitive and they would reduce scholarship offers to students likely to be less price sensitive.

Accepted Answer