Question 1

Value pricing is a practice of deliberately setting high prices to attract high-end consumers.

Accepted Answer

A) True 
 B)False

Question 2

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 = 200 + 3Q
MCM = 4Q
The demand function for the product is:
QD = 600 - P
Assume that the external market for the output of the production division is perfectly competitive and that the market price is $300. How many units should be produced by the production division, how many should be purchased by the marketing division, what transfer price should be paid to the production division by the marketing division, and what price should be charged for the product by the marketing division?

Accepted Answer

Question 3

If there is no external market for an intermediate product, then the transfer price should be set equal to

Accepted Answer

A)  the marginal cost of producing the optimal quantity of the intermediate product. 
B)  the marginal cost of producing the final product. 
C)  the selling price of the final product. 
D)  None of the above is correct. 
A)  the marginal cost of producing the optimal quantity of the intermediate product. 
B)  the marginal cost of producing the final product. 
C)  the selling price of the final product. 
D)  None of the above is correct.

Question 4

A European firm produces cars at a marginal cost of $25,000 and sells the product in two markets (the US and EU). The demand in the US is while the demand in the EU is . What price should the firm charge in the European Union?

Accepted Answer

A)  35,000 
B)  37,500 
C)  42,500 
D)  45,000 
A)  35,000 
B)  37,500 
C)  42,500 
D)  45,000

Question 5

The optimal level of output where products are jointly produced in variable proportions occurs where the marginal cost of production is equal to the vertical summation of the marginal revenues of the individual products.

Accepted Answer

A) True 
 B)False

Question 6

The optimal combination of joint products that are produced in variable proportions is found where

Accepted Answer

A)  the marginal revenue from each product is equal to the marginal cost of producing each product. 
B)  the isorevenue line is tangent to the product transformation curve. 
C)  the isorevenue line is tangent to the relevant total cost curve. 
D)  None of the above is correct. 
A)  the marginal revenue from each product is equal to the marginal cost of producing each product. 
B)  the isorevenue line is tangent to the product transformation curve. 
C)  the isorevenue line is tangent to the relevant total cost curve. 
D)  None of the above is correct.

Question 7

Which of the following is not a condition required for the practice of price discrimination?

Accepted Answer

A)  The firm must be a perfect competitor. 
B)  The price elasticity of demand for the product must be the same under all circumstances. 
C)  The market must not be segmented. 
D)  None of the above is a condition required for the practice of price discrimination. 
A)  The firm must be a perfect competitor. 
B)  The price elasticity of demand for the product must be the same under all circumstances. 
C)  The market must not be segmented. 
D)  None of the above is a condition required for the practice of price discrimination.

Question 8

The fully allocated cost of a product is $12. If the price elasticity of demand for the product is -4, then the firm should charge a price of

Accepted Answer

A)  $16.00. 
B)  $15.00. 
C)  $12.50. 
D)  None of the above is correct. 
A)  $16.00. 
B)  $15.00. 
C)  $12.50. 
D)  None of the above is correct.

Question 9

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 A?

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 10

If two goods (A and B) produced by a single firm are complements in consumption, then the change in total revenue from the sale of B divided by the corresponding change in the quantity of A will be positive.

Accepted Answer

A) True 
 B)False

Question 11

A firm produces a product with a fully allocated average cost equal to $20. If the price elasticity of demand for the product is -5, then the product price should be set at

Accepted Answer

A)  $25. 
B)  $24. 
C)  $23. 
D)  $22. 
A)  $25. 
B)  $24. 
C)  $23. 
D)  $22.

Question 12

If two goods produced by a single firm are complements in consumption, then a decrease in the price of one will cause an increase in demand for the other.

Accepted Answer

A) True 
 B)False

Question 13

A firm that produces two types of smartphone cases has estimated the quantities of Type A and Type B cases that it can produce with two levels of total expenditures as shown in the table below.
 $$\begin{array} { | l | l | l | l | } 
\hline { \text { Total Cost } = 80 } & & { \text { Total cost=110 } } \
\hline \text { Type A } & \text { Type B } & \text { Type A } & \text { Type B } \
\hline 50 & 0 & 60 & 0 \
\hline 45 & 30 & 55 & 40 \
\hline 35 & 50 & 40 & 70 \
\hline 20 & 60 & 24 & 90 \
\hline 0 & 70 & 0 & 100 \
\hline
\end{array}$$ If it sells each of these products for $1 per unit, what is the optimal combination of Type A and Type B smartphone cases the firm should produce and what is the maximum profit it can achieve?

Accepted Answer

The answer of A firm that produces two types of...

Question 14

The Nintari Company produces video-game-playing machines and a second firm, Necsega, owns exclusive rights to manufacture games that can be used with the Nintari game machine. Both of these imperfectly competitive firms are maximizing profits. If Nintari buys Necsega and nothing else changes, then profits will be maximized if Nintari

Accepted Answer

A)  decreases the prices of game machines and games. 
B)  does not change the prices of game machines or games. 
C)  increases the prices of game machines and games. 
D)  None of the above is correct. 
A)  decreases the prices of game machines and games. 
B)  does not change the prices of game machines or games. 
C)  increases the prices of game machines and games. 
D)  None of the above is correct.

Question 15

A single-plant, multiproduct firm will introduce additional products

Accepted Answer

A)  in order of diminishing price elasticities of demand. 
B)  until the marginal revenue from the last product introduced is equal to zero. 
C)  until 100 percent of unused plant capacity is employed. 
D)  None of the above is correct. 
A)  in order of diminishing price elasticities of demand. 
B)  until the marginal revenue from the last product introduced is equal to zero. 
C)  until 100 percent of unused plant capacity is employed. 
D)  None of the above is correct.

Question 16

A firm 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.
 $$\begin{array}{l}
M C _ { P } = 100 + 6 Q\
M C _ { M } = 4 Q
\end{array}$$ The demand function for the product is:
 $$Q D = 120 - 0.20 P$$ (i)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?
(ii)Assume that the external market for the output of the production division is perfectly competitive and that the market price is $292. How many units should be produced by the production division, how many should be purchased by the marketing division, what transfer price should be paid to the production division by the marketing division, and what price should be charged for the product by the marketing division?

Accepted Answer

The answer of A firm has two semiautonomous divisions: production...

Question 17

If the product transformation curves for two goods produced jointly are straight lines, then the two goods are perfect substitutes in production.

Accepted Answer

A) True 
 B)False

Question 18

There are four types of dumping: sporadic, predatory and value.

Accepted Answer

A) True 
 B)False

Question 19

An imperfectly competitive firm produces two products (A and B) with interrelated demand functions. Consumers view these products as substitutes. If the firm increases the number of units of A sold from 150 to 151, total revenue from the sale of A will increase from $1,500 to $1,505. Taking into account the interdependence between A and B, the marginal revenue from the sale of one additional unit of A must be

Accepted Answer

A)  $5. 
B)  greater than $5. 
C)  less than $5. 
D)  This question cannot be answered without additional information. 
A)  $5. 
B)  greater than $5. 
C)  less than $5. 
D)  This question cannot be answered without additional information.

Question 20

If products are produced jointly in fixed proportions, then their product transformation curves are right angles.

Accepted Answer

A) True 
 B)False

Value pricing is a practice of deliberately setting high prices to attract high-end consumers.

If there is no external market for an intermediate product, then the transfer price should be set equal to

A European firm produces cars at a marginal cost of $25,000 and sells the product in two markets (the US and EU). The demand in the US is while the demand in the EU is . What price should the firm charge in the European Union?

The optimal level of output where products are jointly produced in variable proportions occurs where the marginal cost of production is equal to the vertical summation of the marginal revenues of the individual products.

The optimal combination of joint products that are produced in variable proportions is found where

Which of the following is not a condition required for the practice of price discrimination?

The fully allocated cost of a product is $12. If the price elasticity of demand for the product is -4, then the firm should charge a price of

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 A?

If two goods (A and B) produced by a single firm are complements in consumption, then the change in total revenue from the sale of B divided by the corresponding change in the quantity of A will be positive.

A firm produces a product with a fully allocated average cost equal to $20. If the price elasticity of demand for the product is -5, then the product price should be set at

If two goods produced by a single firm are complements in consumption, then a decrease in the price of one will cause an increase in demand for the other.

A single-plant, multiproduct firm will introduce additional products

If the product transformation curves for two goods produced jointly are straight lines, then the two goods are perfect substitutes in production.

There are four types of dumping: sporadic, predatory and value.

If products are produced jointly in fixed proportions, then their product transformation curves are right angles.

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

Value pricing is a practice of deliberately setting high prices to attract high-end consumers.

If there is no external market for an intermediate product, then the transfer price should be set equal to

A European firm produces cars at a marginal cost of $25,000 and sells the product in two markets (the US and EU). The demand in the US is while the demand in the EU is . What price should the firm charge in the European Union?

The optimal level of output where products are jointly produced in variable proportions occurs where the marginal cost of production is equal to the vertical summation of the marginal revenues of the individual products.

The optimal combination of joint products that are produced in variable proportions is found where

Which of the following is not a condition required for the practice of price discrimination?

The fully allocated cost of a product is $12. If the price elasticity of demand for the product is -4, then the firm should charge a price of

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 A?

If two goods (A and B) produced by a single firm are complements in consumption, then the change in total revenue from the sale of B divided by the corresponding change in the quantity of A will be positive.

A firm produces a product with a fully allocated average cost equal to $20. If the price elasticity of demand for the product is -5, then the product price should be set at

If two goods produced by a single firm are complements in consumption, then a decrease in the price of one will cause an increase in demand for the other.

A single-plant, multiproduct firm will introduce additional products

If the product transformation curves for two goods produced jointly are straight lines, then the two goods are perfect substitutes in production.

There are four types of dumping: sporadic, predatory and value.

If products are produced jointly in fixed proportions, then their product transformation curves are right angles.

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 $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 A?