Question 1

For a theme park two-tier pricing can include a positive admission price and a zero per-ride fee.

Accepted Answer

A) True 
 B)False  True

Question 2

Block pricing

Accepted Answer

A) is a form of nonlinear price discrimination. 
B) is pricing where one price is charged for the first block of units purchased, and different prices for subsequent blocks. 
C) can either use increasing or decreasing prices for blocks purchased. 
D) All of the above. 
A) is a form of nonlinear price discrimination. 
B) is pricing where one price is charged for the first block of units purchased, and different prices for subsequent blocks. 
C) can either use increasing or decreasing prices for blocks purchased. 
D) All of the above. D

Question 3

Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result

Accepted Answer

A) price elasticity of demand is the same in each market. 
B) the price-inelastic market will buy zero units. 
C) marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market. 
D) the deadweight loss is less than if the firm price discriminated. 
A) price elasticity of demand is the same in each market. 
B) the price-inelastic market will buy zero units. 
C) marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market. 
D) the deadweight loss is less than if the firm price discriminated. C

Question 4

What is a primary difference between rebates and coupons?

Accepted Answer

A) Coupons allow individuals to sort themselves into the high-elasticity group after the sale. 
B) Neither coupons nor rebates are redeemed in high numbers. 
C) Rebates allow individuals to sort themselves into the high-elasticity group after the sale. 
D) Coupons are legal and rebates are illegal. 
A) Coupons allow individuals to sort themselves into the high-elasticity group after the sale. 
B) Neither coupons nor rebates are redeemed in high numbers. 
C) Rebates allow individuals to sort themselves into the high-elasticity group after the sale. 
D) Coupons are legal and rebates are illegal.

Question 5

Resale is difficult when

Accepted Answer

A) the good is light-weight. 
B) the good is expensive. 
C) transaction costs are high. 
D) transaction costs are negligible. 
A) the good is light-weight. 
B) the good is expensive. 
C) transaction costs are high. 
D) transaction costs are negligible.

Question 6

Nonlinear price discrimination

Accepted Answer

A) sets the price consumers pay based on quantity purchased. 
B) is where the firm sets prices in geometrically or exponentially decreasing price points. 
C) is used in situations where consumers have no reservation prices. 
D) eliminates deadweight loss. 
A) sets the price consumers pay based on quantity purchased. 
B) is where the firm sets prices in geometrically or exponentially decreasing price points. 
C) is used in situations where consumers have no reservation prices. 
D) eliminates deadweight loss.

Question 7

In two-part pricing with identical consumers, a firm

Accepted Answer

A) charges a lump-sum fee equal to the consumer surplus. 
B) sets unit price below marginal cost. 
C) should go with single-price monopoly pricing to maximize profits. 
D) Both A and B. 
A) charges a lump-sum fee equal to the consumer surplus. 
B) sets unit price below marginal cost. 
C) should go with single-price monopoly pricing to maximize profits. 
D) Both A and B.

Question 8

A firm that practices group price discrimination will set the lower price in the market that has the most elastic demand.

Accepted Answer

A) True 
 B)False

Question 9

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then

Accepted Answer

A) consumers who buy larger quantities have a higher price elasticity of demand. 
B) consumers who buy larger quantities have a lower price elasticity of demand. 
C) consumers who buy smaller quantities have a lower price elasticity of demand. 
D) Both A and C. 
A) consumers who buy larger quantities have a higher price elasticity of demand. 
B) consumers who buy larger quantities have a lower price elasticity of demand. 
C) consumers who buy smaller quantities have a lower price elasticity of demand. 
D) Both A and C.

Question 10

A firm practicing group price discrimination across two countries sets MR = common MC and therefore

Accepted Answer

A) price will be the same in both countries. 
B) price will be twice MR. 
C) profit will be the same in both countries. 
D) price will likely be different in each country. 
A) price will be the same in both countries. 
B) price will be twice MR. 
C) profit will be the same in both countries. 
D) price will likely be different in each country.

Question 11

An electricity provider charges consumers $0.20 per kWh for the first 100 kWh, $0.25 per kWh for the next 50 kWh, and $0.27 per kWh for all subsequent kWH of usage. This would be considered

Accepted Answer

A) an antitrust violation. 
B) an example of increasing-block pricing. 
C) bad business practices. 
D) an example of three-part pricing. 
A) an antitrust violation. 
B) an example of increasing-block pricing. 
C) bad business practices. 
D) an example of three-part pricing.

Question 12

-The above figure shows the market for a given product. Defining welfare as consumer surplus plus producer surplus, calculate the social welfare associated with perfect competition, single-price monopoly, and a perfect-price-discriminating monopoly. Which market structure(s)maximize(s)social welfare?

Accepted Answer

Social welfare equals
Perfect competitio

Question 13

At many municipal golf courses, local residents pay a lower fee to play than other golfers do. One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Accepted Answer

A) they can check the identification cards of golfers. 
B) local resident golfers and other golfers have the same price elasticity of demand to play at the municipal course. 
C) there are many golf courses nearby from which golfers can choose. 
D) they require all golfers to rent a cart. 
A) they can check the identification cards of golfers. 
B) local resident golfers and other golfers have the same price elasticity of demand to play at the municipal course. 
C) there are many golf courses nearby from which golfers can choose. 
D) they require all golfers to rent a cart.

Question 14

A firm practicing group price discrimination that has constant marginal cost will

Accepted Answer

A) maximize total profit by maximizing profit for each group separately. 
B) charge the same price to all groups. 
C) act like a monopoly and treat all groups the same. 
D) set p = MC. 
A) maximize total profit by maximizing profit for each group separately. 
B) charge the same price to all groups. 
C) act like a monopoly and treat all groups the same. 
D) set p = MC.

Question 15

Each identical consumer has the following demand for golf, q = 100 - p, where q is the number of rounds of golf played per year and p is the price per round. The only golf course in an isolated town incurs a marginal cost of $10 per round of golf. It wishes to charge a membership fee and a fee per round of golf. What price will it set for each fee?

Accepted Answer

At a price of $10, consumer su

Question 16

During a hot summer weekend, the only supermarket near the beach decides to charge consumers $6.50 for the first 12-pack of soda pop, $5.50 for the second and third 12-packs, and $5.25 for all subsequent purchases during the same shopping trip. This would be considered

Accepted Answer

A) an example of declining-block pricing. 
B) not very smart since consumers will buy soda pop regardless of the price. 
C) an example of monopoly pricing. 
D) an example of an inelastic demand curve. 
A) an example of declining-block pricing. 
B) not very smart since consumers will buy soda pop regardless of the price. 
C) an example of monopoly pricing. 
D) an example of an inelastic demand curve.

Question 17

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

Accepted Answer

A) There are no other firms in the market. 
B) The good is a non-durable. 
C) The good cannot be easily resold. 
D) All of the above. 
A) There are no other firms in the market. 
B) The good is a non-durable. 
C) The good cannot be easily resold. 
D) All of the above.

Question 18

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. Potential consumer surplus equals

Accepted Answer

A) $4. 
B) $8. 
C) $16. 
D) $32. 
A) $4. 
B) $8. 
C) $16. 
D) $32.

Question 19

Explain using welfare measures whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly.

Accepted Answer

Consumers prefer a single pric

Question 20

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. If the marginal cost of installing carpet is a constant $1 per sq yard, what price does Bob charge each segment?

Accepted Answer

A) $1 in each market 
B) $5.50 in the residential market and $8 in the business market 
C) $1 in the residential market and $5 in the business market 
D) $10 in the residential market and $15 in the business market 
A) $1 in each market 
B) $5.50 in the residential market and $8 in the business market 
C) $1 in the residential market and $5 in the business market 
D) $10 in the residential market and $15 in the business market

For a theme park two-tier pricing can include a positive admission price and a zero per-ride fee.

Block pricing

Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result

What is a primary difference between rebates and coupons?

Resale is difficult when

Nonlinear price discrimination

In two-part pricing with identical consumers, a firm

A firm that practices group price discrimination will set the lower price in the market that has the most elastic demand.

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then

A firm practicing group price discrimination across two countries sets MR = common MC and therefore

An electricity provider charges consumers $0.20 per kWh for the first 100 kWh, $0.25 per kWh for the next 50 kWh, and $0.27 per kWh for all subsequent kWH of usage. This would be considered

At many municipal golf courses, local residents pay a lower fee to play than other golfers do. One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

A firm practicing group price discrimination that has constant marginal cost will

During a hot summer weekend, the only supermarket near the beach decides to charge consumers $6.50 for the first 12-pack of soda pop, $5.50 for the second and third 12-packs, and $5.25 for all subsequent purchases during the same shopping trip. This would be considered

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. Potential consumer surplus equals

Explain using welfare measures whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly.

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. If the marginal cost of installing carpet is a constant $1 per sq yard, what price does Bob charge each segment?

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 10: Pricing With Market Power

For a theme park two-tier pricing can include a positive admission price and a zero per-ride fee.

Block pricing

Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result

What is a primary difference between rebates and coupons?

Resale is difficult when

Nonlinear price discrimination

In two-part pricing with identical consumers, a firm

A firm that practices group price discrimination will set the lower price in the market that has the most elastic demand.

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then

A firm practicing group price discrimination across two countries sets MR = common MC and therefore

An electricity provider charges consumers $0.20 per kWh for the first 100 kWh, $0.25 per kWh for the next 50 kWh, and $0.27 per kWh for all subsequent kWH of usage. This would be considered

At many municipal golf courses, local residents pay a lower fee to play than other golfers do. One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

A firm practicing group price discrimination that has constant marginal cost will

During a hot summer weekend, the only supermarket near the beach decides to charge consumers $6.50 for the first 12-pack of soda pop, $5.50 for the second and third 12-packs, and $5.25 for all subsequent purchases during the same shopping trip. This would be considered

Which of the following conditions must be TRUE so that a firm can profitably price discriminate?

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. Potential consumer surplus equals

Explain using welfare measures whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly.

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. If the marginal cost of installing carpet is a constant $1 per sq yard, what price does Bob charge each segment?

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters