Exam 10: Pricing Strategies for the Firm

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Assume a firm sells two complementary products.Bundling is more likely to be a successful price discrimination strategy when one group of customers is willing to pay a higher price for one of the items in the bundle and another group is willing to pay a higher price for the other item.

(True/False)

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Question 61

The goal of "personalized pricing" is to determine how much each individual customer is willing to pay for a product.As such, it is an application of first-degree price discrimination.

(True/False)

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Question 62

Assume the price elasticity of demand for a product is -4.In this case, the firm's optimal markup is (approximately):

(Multiple Choice)

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Question 63

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:

(Multiple Choice)

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Question 64

Applying a uniform markup to set the price of the various products sold by a firm is more profitable than varying the markup based on differences in the price elasticity of demand for the firm's products.

(True/False)

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Question 65

The managerial technique of markup pricing is consistent with the economic theory of profit maximization when the markup is positively related to the price elasticity of demand.

(True/False)

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Question 66

At the profit-maximizing level of output, the amount by which the firm can mark up price is:

(Multiple Choice)

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Question 67

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Assume a firm sells two complementary products.Bundling is more likely to be a successful price discrimination strategy when one group of customers is willing to pay a higher price for one of the items in the bundle and another group is willing to pay a higher price for the other item.

The goal of "personalized pricing" is to determine how much each individual customer is willing to pay for a product.As such, it is an application of first-degree price discrimination.

Assume the price elasticity of demand for a product is -4.In this case, the firm's optimal markup is (approximately):

Applying a uniform markup to set the price of the various products sold by a firm is more profitable than varying the markup based on differences in the price elasticity of demand for the firm's products.

The managerial technique of markup pricing is consistent with the economic theory of profit maximization when the markup is positively related to the price elasticity of demand.

At the profit-maximizing level of output, the amount by which the firm can mark up price is:

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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