Question 1

The fully allocated cost of a product is $45. If the firm wants to use a markup of 30 percent, then it should charge a unit price of

Accepted Answer

A)  $48.00. 
B)  $58.50. 
C)  $60.00. 
D)  None of the above is correct. 
A)  $48.00. 
B)  $58.50. 
C)  $60.00. 
D)  None of the above is correct.

Question 2

A grocery store that offers one can of soup for $0.35 and three cans for $1.00 is engaging 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 3

Ice-cream company is selling its product to individual consumers and restaurants. The demand functions of the two types of customers and the total cost function of the ice-cream company are given below.
 $$\text { Individual consumers: } Q _ { 1 } = 160 - 10 P _ { 1 }$$ $$\text { Restaurants: } Q _ { 2 } = 200 - 10 P _ { 2 }$$ What is the optimal level of output and how should the firm distribute its sales?
 $$T C = 100 + 10 Q$$

Accepted Answer

The answer of Ice-cream company is selling its product to...

Question 4

A firm charges one price in the United States and a different price in Europe. Selling goods and services at different prices to two different markets not arising from higher costs is known as

Accepted Answer

A)  First-degree price discrimination 
B)  Second-degree price discrimination 
C)  Third-degree price discrimination 
D)  Fourth-degree price discrimination 
A)  First-degree price discrimination 
B)  Second-degree price discrimination 
C)  Third-degree price discrimination 
D)  Fourth-degree price discrimination

Question 5

Consider a firm that operates with a fixed marginal cost of $10 and faces a demand governed by the following relationship: Q = 100 - 5 P
What should the profit maximizing level of output be?

Accepted Answer

A)  15 
B)  20 
C)  25 
D)  30 
A)  15 
B)  20 
C)  25 
D)  30

Question 6

The optimal output of joint products that are produced in fixed proportions is found where

Accepted Answer

A)  the vertical sum of the marginal revenue from each product is equal to marginal cost. 
B)  the horizontal sum of the marginal revenue from each product is equal to marginal cost. 
C)  the marginal revenue from each product is equal to the marginal cost of producing each product. 
D)  the marginal cost is equal to the corresponding price of each product. 
A)  the vertical sum of the marginal revenue from each product is equal to marginal cost. 
B)  the horizontal sum of the marginal revenue from each product is equal to marginal cost. 
C)  the marginal revenue from each product is equal to the marginal cost of producing each product. 
D)  the marginal cost is equal to the corresponding price of each product.

Question 7

If a firm has idle plant capacity, then it should produce additional products even if the marginal cost of doing so exceeds marginal revenue.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following is 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 be segmented. 
D)  None of the above are conditions 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 be segmented. 
D)  None of the above are conditions required for the practice of price discrimination.

Question 9

A single-plant multiproduct firm will produce a quantity of each product such that the marginal cost of each product is the same.

Accepted Answer

A) True 
 B)False

Question 10

The fully allocated cost of a product is $10. If the price elasticity of demand for the product is -2, then the firm's optimal markup is

Accepted Answer

A)  10 percent. 
B)  100 percent. 
C)  200 percent. 
D)  None of the above is correct. 
A)  10 percent. 
B)  100 percent. 
C)  200 percent. 
D)  None of the above is correct.

Question 11

Under cost-plus pricing, the more price elastic the demand is for a product, the higher the markup should be.

Accepted Answer

A) True 
 B)False

Question 12

Joint production is the result of production interdependence.

Accepted Answer

A) True 
 B)False

Question 13

Transfer pricing helps the multinational firms to

Accepted Answer

A)  allocate resources between divisions. 
B)  produce the optimum amount of intermediate goods. 
C)  create incentives for subdivisions of firms to increase profitability. 
D)  All of the above 
A)  allocate resources between divisions. 
B)  produce the optimum amount of intermediate goods. 
C)  create incentives for subdivisions of firms to increase profitability. 
D)  All of the above

Question 14

Markup equals

Accepted Answer

A)  the difference between price and fully allocated average cost divided by the fully allocated average cost. 
B)  the difference between price and marginal cost divided by the marginal cost. 
C)  the difference between price and average variable cost divided by the average variable cost. 
D)  the difference between price and average fixed cost divided by the average fixed cost. 
A)  the difference between price and fully allocated average cost divided by the fully allocated average cost. 
B)  the difference between price and marginal cost divided by the marginal cost. 
C)  the difference between price and average variable cost divided by the average variable cost. 
D)  the difference between price and average fixed cost divided by the average fixed cost.

Question 15

A firm practices first-degree price discrimination. The demand for the firm's product is defined as QD = 20 - 2P. If the firm has a constant marginal cost of production equal to $7 and the product is infinitely divisible, how much output should it produce to maximize profit?

Accepted Answer

A)  3 
B)  5 
C)  6 
D)  None of the above is correct. 
A)  3 
B)  5 
C)  6 
D)  None of the above is correct.

Question 16

Which of the following are examples of price discrimination?

Accepted Answer

A)  Entertainment companies charging lower prices for afternoon than for evening performances of movies 
B)  Legal professionals charging lower fees to low-income than to high-income people 
C)  Power companies charging lower prices to commercial than to residential users 
D)  All of the above are examples of price discrimination. 
A)  Entertainment companies charging lower prices for afternoon than for evening performances of movies 
B)  Legal professionals charging lower fees to low-income than to high-income people 
C)  Power companies charging lower prices to commercial than to residential users 
D)  All of the above are examples of price discrimination.

Question 17

Icarus Medical Supplies produces patented adhesives that are used to reassemble broken bones. Pindrop Medical Products manufactures patented pins that are also used to reassemble broken bones. Both of these imperfectly competitive firms are maximizing profit. If Icarus merges with Pindrop, then the merged firm will maximize profits if it

Accepted Answer

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

Question 18

Price discrimination is most effective if all consumers have the same price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 19

A firm practices first-degree price discrimination. The demand for the firm's product is defined as QD = 20 - 2P. If the firm maximizes profit by selling 4 units of output and the product is infinitely divisible, what is the firm's total revenue?

Accepted Answer

A)  $32 
B)  $36 
C)  $40 
D)  None of the above is correct. 
A)  $32 
B)  $36 
C)  $40 
D)  None of the above is correct.

Question 20

Perfectly competitive firms can engage in second-degree price discrimination.

Accepted Answer

A) True 
 B)False

The fully allocated cost of a product is $45. If the firm wants to use a markup of 30 percent, then it should charge a unit price of

A grocery store that offers one can of soup for $0.35 and three cans for $1.00 is engaging in

A firm charges one price in the United States and a different price in Europe. Selling goods and services at different prices to two different markets not arising from higher costs is known as

Consider a firm that operates with a fixed marginal cost of $10 and faces a demand governed by the following relationship: Q = 100 - 5 P What should the profit maximizing level of output be?

The optimal output of joint products that are produced in fixed proportions is found where

If a firm has idle plant capacity, then it should produce additional products even if the marginal cost of doing so exceeds marginal revenue.

Which one of the following is a condition required for the practice of price discrimination?

A single-plant multiproduct firm will produce a quantity of each product such that the marginal cost of each product is the same.

The fully allocated cost of a product is $10. If the price elasticity of demand for the product is -2, then the firm's optimal markup is

Under cost-plus pricing, the more price elastic the demand is for a product, the higher the markup should be.

Joint production is the result of production interdependence.

Transfer pricing helps the multinational firms to

Markup equals

A firm practices first-degree price discrimination. The demand for the firm's product is defined as QD = 20 - 2P. If the firm has a constant marginal cost of production equal to $7 and the product is infinitely divisible, how much output should it produce to maximize profit?

Which of the following are examples of price discrimination?

Price discrimination is most effective if all consumers have the same price elasticity of demand.

A firm practices first-degree price discrimination. The demand for the firm's product is defined as QD = 20 - 2P. If the firm maximizes profit by selling 4 units of output and the product is infinitely divisible, what is the firm's total revenue?

Perfectly competitive firms can engage in second-degree price discrimination.

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

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Exam 12: Pricing Practices

The fully allocated cost of a product is $45. If the firm wants to use a markup of 30 percent, then it should charge a unit price of

A grocery store that offers one can of soup for $0.35 and three cans for $1.00 is engaging in

A firm charges one price in the United States and a different price in Europe. Selling goods and services at different prices to two different markets not arising from higher costs is known as

Consider a firm that operates with a fixed marginal cost of $10 and faces a demand governed by the following relationship: Q = 100 - 5 P What should the profit maximizing level of output be?

The optimal output of joint products that are produced in fixed proportions is found where

If a firm has idle plant capacity, then it should produce additional products even if the marginal cost of doing so exceeds marginal revenue.

Which one of the following is a condition required for the practice of price discrimination?

A single-plant multiproduct firm will produce a quantity of each product such that the marginal cost of each product is the same.

The fully allocated cost of a product is $10. If the price elasticity of demand for the product is -2, then the firm's optimal markup is

Under cost-plus pricing, the more price elastic the demand is for a product, the higher the markup should be.

Joint production is the result of production interdependence.

Transfer pricing helps the multinational firms to

Markup equals

A firm practices first-degree price discrimination. The demand for the firm's product is defined as QD = 20 - 2P. If the firm has a constant marginal cost of production equal to $7 and the product is infinitely divisible, how much output should it produce to maximize profit?

Which of the following are examples of price discrimination?

Price discrimination is most effective if all consumers have the same price elasticity of demand.

A firm practices first-degree price discrimination. The demand for the firm's product is defined as QD = 20 - 2P. If the firm maximizes profit by selling 4 units of output and the product is infinitely divisible, what is the firm's total revenue?

Perfectly competitive firms can engage in second-degree price discrimination.

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