Question 1

Entrepreneurs who earn arbitrage profit are able to do so by extracting the total consumer surplus from buyers.

Accepted Answer

A) True 
 B)False  False

Question 2

Transactions costs refer to

Accepted Answer

A) the implicit costs of production. 
B) the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. 
C) the raw material cost of production. 
D) the cost of transporting goods from one destination to another. 
A) the implicit costs of production. 
B) the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. 
C) the raw material cost of production. 
D) the cost of transporting goods from one destination to another. B

Question 3

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1,200.Assume that Iris and Daphne do not know each other.Which of the following statements is true?

Accepted Answer

A) Joss should charge each customer $600; that way he will earn his opportunity cost and it will be fair to both Iris and Daphne. 
B) Joss should charge Iris $500 and Daphne no more than $700; that way he earns his opportunity cost and there is no loss in economic surplus. 
C) Joss should charge Iris $500 and Daphne $800; that way economic surplus is maximized. 
D) Joss should charge Iris $500 but charging Daphne $800 is unfair because it allows Joss to earn more than his opportunity cost. 
A) Joss should charge each customer $600; that way he will earn his opportunity cost and it will be fair to both Iris and Daphne. 
B) Joss should charge Iris $500 and Daphne no more than $700; that way he earns his opportunity cost and there is no loss in economic surplus. 
C) Joss should charge Iris $500 and Daphne $800; that way economic surplus is maximized. 
D) Joss should charge Iris $500 but charging Daphne $800 is unfair because it allows Joss to earn more than his opportunity cost. C

Question 4

The following table contains the actual prices charged by four Web sites for a 3D Collector's Edition Blu-ray disc of the movie Marvel's Avengers: Age of Ultron in November 2015.
   
Explain whether the information in this table contradicts the law of one price.

Accepted Answer

Unless there are big differenc

Question 5

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

Accepted Answer

A) odd pricing. 
B) dual pricing. 
C) a two-part tariff. 
D) intertemporal pricing. 
A) odd pricing. 
B) dual pricing. 
C) a two-part tariff. 
D) intertemporal pricing.

Question 6

A firm that can effectively price discriminate will charge a higher price to

Accepted Answer

A) customers who have the more elastic demand for the product. 
B) customers who have the more inelastic demand for the product. 
C) buyers who belong to the largest market segment. 
D) buyers who are members of the smallest market segment. 
A) customers who have the more elastic demand for the product. 
B) customers who have the more inelastic demand for the product. 
C) buyers who belong to the largest market segment. 
D) buyers who are members of the smallest market segment.

Question 7

The prices college students and faculty members pay for Apple computers are lower than the prices Apple charges on its Web site and in retail stores.Apple charges lower prices to college students and faculty members because

Accepted Answer

A) college students and faculty members have a more elastic demand for computers than the general public. 
B) Apple can deduct from its federal taxes some of the costs of the computers it sells to college students and faculty members. 
C) college students and faculty members have a more inelastic demand for computers than the general public. 
D) college students and faculty members typically buy more supplies from Apple (print cartridges, paper, etc.,)than the general public. 
A) college students and faculty members have a more elastic demand for computers than the general public. 
B) Apple can deduct from its federal taxes some of the costs of the computers it sells to college students and faculty members. 
C) college students and faculty members have a more inelastic demand for computers than the general public. 
D) college students and faculty members typically buy more supplies from Apple (print cartridges, paper, etc.,)than the general public.

Question 8

Figure 16-5
  
-Refer to Figure 16-5.Consider the following two pricing strategies:
A.a fixed fee and a per-unit price equal to the monopoly price
B.a fixed fee and a per-unit price equal to the competitive price
The firm represented in the diagram earns a higher profit under strategy ________ and deadweight loss is eliminated under ________.

Accepted Answer

A) b; b 
B) a; b 
C) a; neither strategy 
D) b; neither strategy 
A) b; b 
B) a; b 
C) a; neither strategy 
D) b; neither strategy

Question 9

The airline industry routinely engages in price discrimination across time.

Accepted Answer

A) True 
 B)False

Question 10

Consider three pricing strategies that the firm can pursue:
A.optimal two-part tariff pricing
B.perfect price discrimination
C.single-price monopoly pricing
Of these three strategies, which method gives the firm the highest profit?

Accepted Answer

A) optimal two-part tariff pricing 
B) perfect price discrimination 
C) single-price monopoly pricing 
D) The profit is the same under optimal two-part tariff pricing and perfect price discrimination and the profit is higher than under single-price monopoly pricing. 
A) optimal two-part tariff pricing 
B) perfect price discrimination 
C) single-price monopoly pricing 
D) The profit is the same under optimal two-part tariff pricing and perfect price discrimination and the profit is higher than under single-price monopoly pricing.

Question 11

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

Accepted Answer

A) True 
 B)False

Question 12

What is yield management? How is yield management being used in the airline industry?

Accepted Answer

Yield management is the use of sophistic

Question 13

The law of one price states that identical products should sell for the same price everywhere as long as transactions costs are zero.

Accepted Answer

A) True 
 B)False

Question 14

When you buy at a low price in one market then sell at a higher price in another market you are engaging in

Accepted Answer

A) odd pricing. 
B) arbitrage. 
C) an antitrust prohibited practice. 
D) price discrimination. 
A) odd pricing. 
B) arbitrage. 
C) an antitrust prohibited practice. 
D) price discrimination.

Question 15

Table 16-2
   
Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2.The average cost of production is constant at $2 per tube.
-Refer to Table 16-2.What is the total revenue received from both markets combined?

Accepted Answer

A) $30 
B) $34 
C) $68 
D) $70 
A) $30 
B) $34 
C) $68 
D) $70

Question 16

"Buy low and sell high is advice given to people who want to make a profit by buying and selling shares of stock.Arbitrage is defined as buying a product in one market at a low price and reselling it in another market at a high price.Therefore, when stock brokers buy and sell stocks to earn a profit they are engaging in arbitrage." Evaluate this statement; state whether it is true or false and explain your answer.

Accepted Answer

The statement is false.Buying and sellin

Question 17

Arbitrage refers to the act of

Accepted Answer

A) resolving a dispute in front of an arbitrator instead of a court of law. 
B) buying a product in one market at a low price and reselling in another market at a higher price. 
C) trading in the foreign exchange market. 
D) suing a producer for illegal business practices. 
A) resolving a dispute in front of an arbitrator instead of a court of law. 
B) buying a product in one market at a low price and reselling in another market at a higher price. 
C) trading in the foreign exchange market. 
D) suing a producer for illegal business practices.

Question 18

Arnold's Airport Transport provides passenger transportation to and from the local airport.Arnold charges a flat rate of $30 per person for round-trip service, and he gives a $5 discount to senior citizens.Assume Arnold's marginal cost is $3.00 per person.Draw two graphs, one showing demand and marginal cost for his $30 customers, of which he has 300 per month, and the other graph showing demand and marginal cost for his senior citizen customers, of which he has 100 per month.If Arnold charged all of his customers $30, he would have 325 customers per month.

Accepted Answer

The answer of Arnold's Airport Transport provides passenger transportation to...

Question 19

Which of the following is a reason why a firm would not engage in price discrimination?

Accepted Answer

A) Price discrimination is illegal in some western states and the owners of firms in these states face civil or criminal prosecution if they engage in price discrimination. 
B) Some firms are not able to segment the market for the products they sell. 
C) Some firms do not want to violate the law of one price. 
D) The transactions costs associated with selling the product exceed the price of the product. 
A) Price discrimination is illegal in some western states and the owners of firms in these states face civil or criminal prosecution if they engage in price discrimination. 
B) Some firms are not able to segment the market for the products they sell. 
C) Some firms do not want to violate the law of one price. 
D) The transactions costs associated with selling the product exceed the price of the product.

Question 20

Table 16-3
   
Julie plans to start a pet-sitting service.She surveyed her neighborhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 16-3 above shows a portion of her survey results.
-Refer to Table 16-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay.What is Julie's total revenue and how many hours of service will be purchased?

Accepted Answer

A) 4 hours and her total revenue = $39 
B) 4 hours and her total revenue = $28 
C) 1 hour and her total revenue = $7 
D) 5 hours and her total revenue = $35 
A) 4 hours and her total revenue = $39 
B) 4 hours and her total revenue = $28 
C) 1 hour and her total revenue = $7 
D) 5 hours and her total revenue = $35

Entrepreneurs who earn arbitrage profit are able to do so by extracting the total consumer surplus from buyers.

Transactions costs refer to

The following table contains the actual prices charged by four Web sites for a 3D Collector's Edition Blu-ray disc of the movie Marvel's Avengers: Age of Ultron in November 2015. Explain whether the information in this table contradicts the law of one price.

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

A firm that can effectively price discriminate will charge a higher price to

The prices college students and faculty members pay for Apple computers are lower than the prices Apple charges on its Web site and in retail stores.Apple charges lower prices to college students and faculty members because

The airline industry routinely engages in price discrimination across time.

Consider three pricing strategies that the firm can pursue: A.optimal two-part tariff pricing B.perfect price discrimination C.single-price monopoly pricing Of these three strategies, which method gives the firm the highest profit?

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

What is yield management? How is yield management being used in the airline industry?

The law of one price states that identical products should sell for the same price everywhere as long as transactions costs are zero.

When you buy at a low price in one market then sell at a higher price in another market you are engaging in

Table 16-2 Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2.The average cost of production is constant at $2 per tube. -Refer to Table 16-2.What is the total revenue received from both markets combined?

Arbitrage refers to the act of

Which of the following is a reason why a firm would not engage in price discrimination?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 16: Pricing Strategy

Entrepreneurs who earn arbitrage profit are able to do so by extracting the total consumer surplus from buyers.

Transactions costs refer to

The following table contains the actual prices charged by four Web sites for a 3D Collector's Edition Blu-ray disc of the movie Marvel's Avengers: Age of Ultron in November 2015. Explain whether the information in this table contradicts the law of one price.

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase.This practice is referred to as

A firm that can effectively price discriminate will charge a higher price to

The prices college students and faculty members pay for Apple computers are lower than the prices Apple charges on its Web site and in retail stores.Apple charges lower prices to college students and faculty members because

The airline industry routinely engages in price discrimination across time.

Consider three pricing strategies that the firm can pursue: A.optimal two-part tariff pricing B.perfect price discrimination C.single-price monopoly pricing Of these three strategies, which method gives the firm the highest profit?

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

What is yield management? How is yield management being used in the airline industry?

The law of one price states that identical products should sell for the same price everywhere as long as transactions costs are zero.

When you buy at a low price in one market then sell at a higher price in another market you are engaging in

Table 16-2 Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2.The average cost of production is constant at $2 per tube. -Refer to Table 16-2.What is the total revenue received from both markets combined?

Arbitrage refers to the act of

Which of the following is a reason why a firm would not engage in price discrimination?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters