Question 1

Unlike markup pricing,the strategy of price discrimination is totally independent of the price elasticity of demand for the good in question.

Accepted Answer

A) True 
 B)False

Question 2

The total willingness to pay for a given number of units of a good or service is determined by multiplying the equilibrium price of the good by the number of units purchased.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not cited as a reason for a firm to pursue a group pricing strategy?

Accepted Answer

A) To minimize its total costs of production. 
B) To increase its total profit. 
C) To attract and lock in additional customers. 
D) To create network externalities. 
A) To minimize its total costs of production. 
B) To increase its total profit. 
C) To attract and lock in additional customers. 
D) To create network externalities.

Question 4

If a firm is successful in its efforts to reduce the price elasticity of demand for its product,all else constant,the optimal markup that can be used in setting price will increase.

Accepted Answer

A) True 
 B)False

Question 5

The markups restaurants apply to various items are heavily influenced by the price elasticity of the demand for each item.

Accepted Answer

A) True 
 B)False

Question 6

Assume the economy is headed into a recession.Considering this,and recognizing that firms are slow to change the prices they charge for their products,are firms more or less likely to be able to pursue an effective markup pricing strategy in their pursuit of positive economic profit? Why?

Accepted Answer

When the economy goes into a recession,m

Question 7

Many restaurants offer "early-bird specials" to dinner customers.These specials consist of a significant price reduction on selected menu items purchased before some pre-determined time,e.g.,6 p.m.Is such a practice a form of price discrimination? If so,what type?

Accepted Answer

"Early-bird specials" are indeed a form

Question 8

Assume a change in price causes the price elasticity of demand for a good (in absolute value)and marginal revenue to decrease.In this case we can conclude that the price of the good was:

Accepted Answer

A) increased. 
B) held constant. 
C) decreased. 
D) cannot be determined. 
A) increased. 
B) held constant. 
C) decreased. 
D) cannot be determined.

Question 9

BOGOs,i.e.,buy-one,get-one-free offers,are an example of third-degree price discrimination.

Accepted Answer

A) True 
 B)False

Question 10

When the marginal revenue resulting from a decrease in price is negative,demand for the product is:

Accepted Answer

A) elastic. 
B) unit elastic. 
C) inelastic. 
D) cannot be determined without more information. 
A) elastic. 
B) unit elastic. 
C) inelastic. 
D) cannot be determined without more information.

Question 11

The situation in which a firm is able to charge the maximum price consumers are willing to pay for each unit of output the firm sells is referred to 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 12

The suggestion that a seller will try to set price based on "what the market will bear" is explicit recognition of the constraint imposed by:

Accepted Answer

A) the firm's marginal cost of production. 
B) the price elasticity of demand for that item. 
C) the firm's competitors. 
D) the need for most firms to earn positive economic profits over time if they are to remain in business. 
A) the firm's marginal cost of production. 
B) the price elasticity of demand for that item. 
C) the firm's competitors. 
D) the need for most firms to earn positive economic profits over time if they are to remain in business.

Question 13

Because it is based on differences in the price elasticity of demand among different groups of consumers,third-degree price discrimination is a more profitable price discrimination strategy than is first-degree price discrimination.

Accepted Answer

A) True 
 B)False

Question 14

Assume an automobile manufacturer can sell its sport utility vehicle (SUV)with or without a trailer towing package.One group of customers,group A,is willing to pay a maximum of $30,000 for the SUV and $1,100 for the towing package.A second group,B,is willing to pay $29,000 for the SUV and $1,000 for the towing package.Assuming the manufacturer cannot price discriminate,to maximize its revenues the manufacturer should:

Accepted Answer

A) sell the components separately, charging $30,000 for the SUV and $1,000 for the towing package. 
B) sell the components separately, charging $29,000 for the SUV and $1,100 for the towing package. 
C) sell the components separately, charging $29,000 for the SUV and $1,000 for the towing package. 
D) sell the components as a bundle for $30,500. 
A) sell the components separately, charging $30,000 for the SUV and $1,000 for the towing package. 
B) sell the components separately, charging $29,000 for the SUV and $1,100 for the towing package. 
C) sell the components separately, charging $29,000 for the SUV and $1,000 for the towing package. 
D) sell the components as a bundle for $30,500.

Question 15

All else constant,as the price elasticity of demand decreases,so does the marginal revenue resulting from a decrease in price.

Accepted Answer

A) True 
 B)False

Question 16

The situation in which a firm charges different prices for different blocks of output is referred to 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 17

Price discrimination strategies that cause considerable consumer resentment or a negative reaction from competitors can reduce or eliminate the effectiveness of such strategies.

Accepted Answer

A) True 
 B)False

Question 18

All else constant,as the price elasticity of demand for a good at the equilibrium price decreases,the amount of consumer surplus derived from purchasing the equilibrium quantity of the good increases.

Accepted Answer

A) True 
 B)False

Question 19

The practice of charging different prices to various groups of customers that are not based on differences in the costs of production is referred to as:

Accepted Answer

A) predatory pricing. 
B) markup pricing. 
C) discretionary pricing. 
D) price discrimination. 
A) predatory pricing. 
B) markup pricing. 
C) discretionary pricing. 
D) price discrimination.

Question 20

Effective price discrimination will enable a perfectly competitive firm to earn positive economic profits in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Unlike markup pricing,the strategy of price discrimination is totally independent of the price elasticity of demand for the good in question.

The total willingness to pay for a given number of units of a good or service is determined by multiplying the equilibrium price of the good by the number of units purchased.

Which of the following is not cited as a reason for a firm to pursue a group pricing strategy?

If a firm is successful in its efforts to reduce the price elasticity of demand for its product,all else constant,the optimal markup that can be used in setting price will increase.

The markups restaurants apply to various items are heavily influenced by the price elasticity of the demand for each item.

Assume the economy is headed into a recession.Considering this,and recognizing that firms are slow to change the prices they charge for their products,are firms more or less likely to be able to pursue an effective markup pricing strategy in their pursuit of positive economic profit? Why?

Many restaurants offer "early-bird specials" to dinner customers.These specials consist of a significant price reduction on selected menu items purchased before some pre-determined time,e.g.,6 p.m.Is such a practice a form of price discrimination? If so,what type?

Assume a change in price causes the price elasticity of demand for a good (in absolute value)and marginal revenue to decrease.In this case we can conclude that the price of the good was:

BOGOs,i.e.,buy-one,get-one-free offers,are an example of third-degree price discrimination.

When the marginal revenue resulting from a decrease in price is negative,demand for the product is:

The situation in which a firm is able to charge the maximum price consumers are willing to pay for each unit of output the firm sells is referred to as:

The suggestion that a seller will try to set price based on "what the market will bear" is explicit recognition of the constraint imposed by:

Because it is based on differences in the price elasticity of demand among different groups of consumers,third-degree price discrimination is a more profitable price discrimination strategy than is first-degree price discrimination.

All else constant,as the price elasticity of demand decreases,so does the marginal revenue resulting from a decrease in price.

The situation in which a firm charges different prices for different blocks of output is referred to as:

Price discrimination strategies that cause considerable consumer resentment or a negative reaction from competitors can reduce or eliminate the effectiveness of such strategies.

All else constant,as the price elasticity of demand for a good at the equilibrium price decreases,the amount of consumer surplus derived from purchasing the equilibrium quantity of the good increases.

The practice of charging different prices to various groups of customers that are not based on differences in the costs of production is referred to as:

Effective price discrimination will enable a perfectly competitive firm to earn positive economic profits in both the short run and the long run.

Managers and Economics

Demand, supply, and Equilibrium Prices

Demand Elasticities

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Measuring Macroeconomic Activity

Spending by Individuals, firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

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Exam 10: Pricing Strategies for the Firm

Unlike markup pricing,the strategy of price discrimination is totally independent of the price elasticity of demand for the good in question.

The total willingness to pay for a given number of units of a good or service is determined by multiplying the equilibrium price of the good by the number of units purchased.

Which of the following is not cited as a reason for a firm to pursue a group pricing strategy?

If a firm is successful in its efforts to reduce the price elasticity of demand for its product,all else constant,the optimal markup that can be used in setting price will increase.

The markups restaurants apply to various items are heavily influenced by the price elasticity of the demand for each item.

Assume the economy is headed into a recession.Considering this,and recognizing that firms are slow to change the prices they charge for their products,are firms more or less likely to be able to pursue an effective markup pricing strategy in their pursuit of positive economic profit? Why?

Many restaurants offer "early-bird specials" to dinner customers.These specials consist of a significant price reduction on selected menu items purchased before some pre-determined time,e.g.,6 p.m.Is such a practice a form of price discrimination? If so,what type?

Assume a change in price causes the price elasticity of demand for a good (in absolute value)and marginal revenue to decrease.In this case we can conclude that the price of the good was:

BOGOs,i.e.,buy-one,get-one-free offers,are an example of third-degree price discrimination.

When the marginal revenue resulting from a decrease in price is negative,demand for the product is:

The situation in which a firm is able to charge the maximum price consumers are willing to pay for each unit of output the firm sells is referred to as:

The suggestion that a seller will try to set price based on "what the market will bear" is explicit recognition of the constraint imposed by:

Because it is based on differences in the price elasticity of demand among different groups of consumers,third-degree price discrimination is a more profitable price discrimination strategy than is first-degree price discrimination.

All else constant,as the price elasticity of demand decreases,so does the marginal revenue resulting from a decrease in price.

The situation in which a firm charges different prices for different blocks of output is referred to as:

Price discrimination strategies that cause considerable consumer resentment or a negative reaction from competitors can reduce or eliminate the effectiveness of such strategies.

All else constant,as the price elasticity of demand for a good at the equilibrium price decreases,the amount of consumer surplus derived from purchasing the equilibrium quantity of the good increases.

The practice of charging different prices to various groups of customers that are not based on differences in the costs of production is referred to as:

Effective price discrimination will enable a perfectly competitive firm to earn positive economic profits in both the short run and the long run.

Managers and Economics

Demand, supply, and Equilibrium Prices

Demand Elasticities

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Measuring Macroeconomic Activity

Spending by Individuals, firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters