Question 1

A firm charges $14 for a product. If the markup is 40 percent, then the fully allocated average cost is

Accepted Answer

A)  $19.60. 
B)  $10.00. 
C)  $8.40. 
D)  None of the above is correct. 
A)  $19.60. 
B)  $10.00. 
C)  $8.40. 
D)  None of the above is correct. B

Question 2

A firm produces a product at a fixed marginal cost of $10 and sells the product on two different markets (A and B) . The demand on market A is QA = 80 - 2P. The demand on market B is QB = 50 - P. What price should the firm charge on market A?

Accepted Answer

A)  20 
B)  25 
C)  30 
D)  None of the above is correct. 
A)  20 
B)  25 
C)  30 
D)  None of the above is correct. B

Question 3

Prestige lining refers to setting a high product price in order to capitalize on snob appeal.

Accepted Answer

A) True 
 B)False  False

Question 4

A firm produces two products (A and B) jointly. Every time a unit of A is produced, a unit of B is also produced as a byproduct. At the current level of output, the marginal revenue from sales of A is $25 and from sales of B is $12. The marginal cost of producing a unit of A is $30, so the firm should

Accepted Answer

A)  continue producing the current level of output. 
B)  increase its rate of production. 
C)  reduce its rate of production. 
D)  This question cannot be answered without additional information. 
A)  continue producing the current level of output. 
B)  increase its rate of production. 
C)  reduce its rate of production. 
D)  This question cannot be answered without additional information.

Question 5

A firm produces a product at a fixed marginal cost of $2 and sells the product on two different markets (A and B) . The demand on market A is QA = 10 - P. The demand on market B is QB = 20 - P. What price should the firm charge on market B?

Accepted Answer

A)  4 
B)  6 
C)  9 
D)  None of the above is correct. 
A)  4 
B)  6 
C)  9 
D)  None of the above is correct.

Question 6

A firm produces a product at a fixed marginal cost of $10 and sells the product on two different markets (A and B) . The demand on market A is QA = 80 - 2P. The demand on market B is QB = 50 - P. What quantity should the firm sell on market A?

Accepted Answer

A)  20 
B)  25 
C)  30 
D)  None of the above is correct. 
A)  20 
B)  25 
C)  30 
D)  None of the above is correct.

Question 7

A firm produces two products (A and B) jointly. Every time a unit of A is produced, a unit of B is also produced as a byproduct. At the current level of output, the marginal revenue from sales of A is $35 and from sales of B is $12. The marginal cost of producing a unit of A is $35, so the firm should

Accepted Answer

A)  continue producing the current level of output. 
B)  increase its rate of production. 
C)  reduce its rate of production. 
D)  This question cannot be answered without additional information. 
A)  continue producing the current level of output. 
B)  increase its rate of production. 
C)  reduce its rate of production. 
D)  This question cannot be answered without additional information.

Question 8

A multinational corporation has two semiautonomous divisions: production and marketing. The production division manufactures a product that is purchased and then resold by the marketing division. The marginal cost functions for the production division and for the value added by the marketing division are defined below.
MCP = 100 + 2Q
MCM = 2Q
The demand function for the product is:
QD = 120 - 0.50P
Assume that there is no external market for the output of the production division. How many units should be produced and what transfer price should be paid to the production division by the marketing division?

Accepted Answer

Question 9

What price should the firm charge for its new electric toothbrush if the fully allocated average cost is $15 and the firm wants to apply a 25 percent markup cost?

Accepted Answer

A)  $15 
B)  $18.75 
C)  $19.25 
D)  $20 
A)  $15 
B)  $18.75 
C)  $19.25 
D)  $20

Question 10

A firm will realize the highest level of profit if it is able to engage in

Accepted Answer

A)  first-degree price discrimination. 
B)  second-degree price discrimination. 
C)  third-degree price discrimination. 
D)  The answer cannot be determined without additional information. 
A)  first-degree price discrimination. 
B)  second-degree price discrimination. 
C)  third-degree price discrimination. 
D)  The answer cannot be determined without additional information.

Question 11

A single-plant firm that produces more than one product will charge the same price for every product that it produces.

Accepted Answer

A) True 
 B)False

Question 12

The method of adding a markup cost on top of the fully allocated average cost is known as

Accepted Answer

A)  transfer pricing. 
B)  cost-plus pricing. 
C)  predatory pricing. 
D)  dumping. 
A)  transfer pricing. 
B)  cost-plus pricing. 
C)  predatory pricing. 
D)  dumping.

Question 13

A firm produces two products (A and B) jointly. Every time a unit of A is produced, a unit of B is also produced as a byproduct. The demand functions for A and B are: $$Q _ { A } = 3000 - 20 P _ { A } \quad Q _ { B } = 1000 - 10 P _ { B }$$ Assuming that disposal is costless, determine the number of units of A and B that the firm should produce, the number of units of A and B that the firm should sell, and the price that should be charged for each of the products if the firm's marginal cost of producing a unit of joint output is: $$\text { (i) } M C = 70 + 0.30 Q$$ $$\text { (ii) } M C = 10 + 0.04 Q$$

Accepted Answer

The answer of A firm produces two products (A and...

Question 14

Setting of a price target by a firm and then developing a product that would allow the firm to maximize profits at that price is known as

Accepted Answer

A)  price lining. 
B)  prestige pricing. 
C)  skimming. 
D)  value pricing. 
A)  price lining. 
B)  prestige pricing. 
C)  skimming. 
D)  value pricing.

Question 15

First-degree price discrimination would allow a firm to charge the maximum possible price for every unit sold.

Accepted Answer

A) True 
 B)False

Question 16

Persistent dumping refers to the practice of

Accepted Answer

A)  international price discrimination. 
B)  charging a lower price on foreign markets where demand is more price elastic. 
C)  taking advantage of the segmentation of markets that results from domestic restrictions on imports. 
D)  All of the above are correct. 
A)  international price discrimination. 
B)  charging a lower price on foreign markets where demand is more price elastic. 
C)  taking advantage of the segmentation of markets that results from domestic restrictions on imports. 
D)  All of the above are correct.

Question 17

Price discrimination refers to

Accepted Answer

A)  charging different prices for different quantities and markets due to varying cost. 
B)  charging foreigners exclusively higher prices. 
C)  charging local minorities higher prices without cost justification. 
D)  charging of different prices for different quantities, markets or times. 
A)  charging different prices for different quantities and markets due to varying cost. 
B)  charging foreigners exclusively higher prices. 
C)  charging local minorities higher prices without cost justification. 
D)  charging of different prices for different quantities, markets or times.

Question 18

Assume a firm sells its product in two continents. If the firm engages in third-degree price discrimination, it will make sure that the quantities sold in each market are the same.

Accepted Answer

A) True 
 B)False

Question 19

Price discrimination refers to charging different prices for a product when price differences are not justified by differences in cost.

Accepted Answer

A) True 
 B)False

Question 20

Deliberately setting high prices to attract high-end customers is known as

Accepted Answer

A)  price lining. 
B)  prestige pricing. 
C)  skimming. 
D)  value pricing. 
A)  price lining. 
B)  prestige pricing. 
C)  skimming. 
D)  value pricing.

A firm charges $14 for a product. If the markup is 40 percent, then the fully allocated average cost is

A firm produces a product at a fixed marginal cost of $10 and sells the product on two different markets (A and B) . The demand on market A is Q_A = 80 - 2P. The demand on market B is Q_B = 50 - P. What price should the firm charge on market A?

Prestige lining refers to setting a high product price in order to capitalize on snob appeal.

A firm produces a product at a fixed marginal cost of $2 and sells the product on two different markets (A and B) . The demand on market A is Q_A = 10 - P. The demand on market B is Q_B = 20 - P. What price should the firm charge on market B?

A firm produces a product at a fixed marginal cost of $10 and sells the product on two different markets (A and B) . The demand on market A is Q_A = 80 - 2P. The demand on market B is Q_B = 50 - P. What quantity should the firm sell on market A?

What price should the firm charge for its new electric toothbrush if the fully allocated average cost is $15 and the firm wants to apply a 25 percent markup cost?

A firm will realize the highest level of profit if it is able to engage in

A single-plant firm that produces more than one product will charge the same price for every product that it produces.

The method of adding a markup cost on top of the fully allocated average cost is known as

Setting of a price target by a firm and then developing a product that would allow the firm to maximize profits at that price is known as

First-degree price discrimination would allow a firm to charge the maximum possible price for every unit sold.

Persistent dumping refers to the practice of

Price discrimination refers to

Assume a firm sells its product in two continents. If the firm engages in third-degree price discrimination, it will make sure that the quantities sold in each market are the same.

Price discrimination refers to charging different prices for a product when price differences are not justified by differences in cost.

Deliberately setting high prices to attract high-end customers is known as

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters

Exam 12: Pricing Practices

A firm charges $14 for a product. If the markup is 40 percent, then the fully allocated average cost is

A firm produces a product at a fixed marginal cost of $10 and sells the product on two different markets (A and B) . The demand on market A is QA = 80 - 2P. The demand on market B is QB = 50 - P. What price should the firm charge on market A?

Prestige lining refers to setting a high product price in order to capitalize on snob appeal.

A firm produces a product at a fixed marginal cost of $2 and sells the product on two different markets (A and B) . The demand on market A is QA = 10 - P. The demand on market B is QB = 20 - P. What price should the firm charge on market B?

A firm produces a product at a fixed marginal cost of $10 and sells the product on two different markets (A and B) . The demand on market A is QA = 80 - 2P. The demand on market B is QB = 50 - P. What quantity should the firm sell on market A?

What price should the firm charge for its new electric toothbrush if the fully allocated average cost is $15 and the firm wants to apply a 25 percent markup cost?

A firm will realize the highest level of profit if it is able to engage in

A single-plant firm that produces more than one product will charge the same price for every product that it produces.

The method of adding a markup cost on top of the fully allocated average cost is known as

Setting of a price target by a firm and then developing a product that would allow the firm to maximize profits at that price is known as

First-degree price discrimination would allow a firm to charge the maximum possible price for every unit sold.

Persistent dumping refers to the practice of

Price discrimination refers to

Assume a firm sells its product in two continents. If the firm engages in third-degree price discrimination, it will make sure that the quantities sold in each market are the same.

Price discrimination refers to charging different prices for a product when price differences are not justified by differences in cost.

Deliberately setting high prices to attract high-end customers is known as

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters

A firm produces a product at a fixed marginal cost of $10 and sells the product on two different markets (A and B) . The demand on market A is Q_A = 80 - 2P. The demand on market B is Q_B = 50 - P. What price should the firm charge on market A?

A firm produces a product at a fixed marginal cost of $2 and sells the product on two different markets (A and B) . The demand on market A is Q_A = 10 - P. The demand on market B is Q_B = 20 - P. What price should the firm charge on market B?

A firm produces a product at a fixed marginal cost of $10 and sells the product on two different markets (A and B) . The demand on market A is Q_A = 80 - 2P. The demand on market B is Q_B = 50 - P. What quantity should the firm sell on market A?