Question 1

Price discrimination requires that different customers have different levels of price sensitivity and that

Accepted Answer

A) the cost of production is different for every customer. 
B) customers cannot resell the product amongst themselves. 
C) demand is homogeneous amongst customers. 
D) marginal costs are falling. 
A) the cost of production is different for every customer. 
B) customers cannot resell the product amongst themselves. 
C) demand is homogeneous amongst customers. 
D) marginal costs are falling.

Question 2

Which of the following is a reason for firms to bundle products?

Accepted Answer

A) To extract additional profit from a customer base with heterogeneous product demand 
B) To extract additional profit by charging higher prices for the goods in a bundle 
C) To clear the old stock of the product 
D) To increase customer welfare and satisfaction 
A) To extract additional profit from a customer base with heterogeneous product demand 
B) To extract additional profit by charging higher prices for the goods in a bundle 
C) To clear the old stock of the product 
D) To increase customer welfare and satisfaction

Question 3

______ extracts the maximum amount each customer is willing to pay for a product.

Accepted Answer

A) Personalized pricing 
B) Group Pricing 
C) Two-part tariff 
D) Bundling 
A) Personalized pricing 
B) Group Pricing 
C) Two-part tariff 
D) Bundling

Question 4

The higher the price elasticity,the

Accepted Answer

A) more sensitive price changes are to quantity demanded. 
B) less sensitive price changes are to quantity demanded. 
C) more sensitive quantity demanded is to price changes. 
D) less sensitive quantity demanded is to price changes. 
A) more sensitive price changes are to quantity demanded. 
B) less sensitive price changes are to quantity demanded. 
C) more sensitive quantity demanded is to price changes. 
D) less sensitive quantity demanded is to price changes.

Question 5

A firm with market power in pricing faces a

Accepted Answer

A) flat demand curve. 
B) supply curve parallel to the horizontal axis. 
C) downward-sloping supply curve. 
D) downward-sloping demand curve. 
A) flat demand curve. 
B) supply curve parallel to the horizontal axis. 
C) downward-sloping supply curve. 
D) downward-sloping demand curve.

Question 6

Disney sold The Little Mermaid for $20 with a $5 mail in rebate.The rebate should have

Accepted Answer

A) reduced overall customer demand. 
B) stabilized overall customer demand. 
C) increased overall customer demand. 
D) inverted overall customer demand. 
A) reduced overall customer demand. 
B) stabilized overall customer demand. 
C) increased overall customer demand. 
D) inverted overall customer demand.

Question 7

A small fitness center that offers only personal training services has the following demand and cost parameters:
Demand: The fitness center has found that it has some discretion in pricing??-that is,it can raise price marginally without drastic reductions in volume.Based on statistical estimates of demand and assuming that external factors stay constant (e.g.,price of competitors' services,income levels,etc.),the following relationship exists between the hourly rate for a personal training session (P)and the number of sessions demanded per day (Q):
P = 140 - Q.
Costs: The fitness center finds that its variable costs (e.g.,labor)increase at a constant rate of $40 with each additional training session provided per day.Fixed costs such as rent are equal to $200 per day.This yields the following total variable cost (TVC)and total fixed cost (TFC)equations:
TVC = 40Q.
TFC = 200.
(a)Find the price and quantity demanded (P and Q)that maximize total profit.
(b)What is the maximum possible profit?

Accepted Answer

The highest possible profit that can be

Question 8

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and a different price to night customers,then the profit will be

Accepted Answer

A) $374.25. 
B) $62.50. 
C) $562.50. 
D) $150.00. 
A) $374.25. 
B) $62.50. 
C) $562.50. 
D) $150.00.

Question 9

Using the linear approximation system to estimate the profit maximizing price requires that managers have information on the cost of production

Accepted Answer

A) and the nature of the production function. 
B) the total population and the percentage of people in labor force. 
C) the current price,the current quantity sold,and changes in price and quantity. 
D) and the decision-making process of the marketplace. 
A) and the nature of the production function. 
B) the total population and the percentage of people in labor force. 
C) the current price,the current quantity sold,and changes in price and quantity. 
D) and the decision-making process of the marketplace.

Question 10

Third-degree price discrimination results when a firm sells

Accepted Answer

A) its product to every customer at a different price. 
B) its product by volume at a different price. 
C) every unit at the same price. 
D) its product to different groups at different prices. 
A) its product to every customer at a different price. 
B) its product by volume at a different price. 
C) every unit at the same price. 
D) its product to different groups at different prices.

Question 11

Great Nuggets finds that there is a clear gender difference in the demand for their chocolates.Men have very little price sensitivity and tend to buy whatever the sales clerk recommends.Women,on the other hand,tend to ask many questions about product quality and attempt to maximize the quantity available for the price.Great Nuggets would like to implement a two-tier pricing system based on gender.What (nonlegal)problems would it encounter?

Accepted Answer

The problem this firm would face is the

Question 12

If Tiger Toys faces a demand curve of P = 85 − 0.25Q and a MC = ATC = 20,then the markup would be

Accepted Answer

A) $52.50. 
B) $20.00. 
C) $32.50. 
D) $65.00. 
A) $52.50. 
B) $20.00. 
C) $32.50. 
D) $65.00.

Question 13

Refer to Figure 7.2.If Happy Times Theater charges one price to all customers,then that price will be

Accepted Answer

A) $6.25. 
B) $7.50. 
C) $10.00. 
D) Not enough information available. 
A) $6.25. 
B) $7.50. 
C) $10.00. 
D) Not enough information available.

Question 14

Tax Fighters,Inc.,develops,markets,and sells software for tax preparation.Tax Fighters,Inc.sells IRS Tax Fighter,a software for completing federal income tax forms and Gopher Basher,a software for completing Minnesota state income tax forms.For simplicity,assume that all of the costs in this industry are the fixed costs of developing the software packages themselves.The marginal cost of producing another disk is approximately zero.
Consider the following information about the demand for tax software.There are an equal number of consumers in each group.Figure 7.1 shows the maximum that each type of consumer is willing to pay for each product.As vice president for pricing,explain your optimal bundling and pricing strategy to maximize Tax Fighter profits from the sale of tax software.Be sure to clearly explain why your strategy is.optimal.

Accepted Answer

Group 2 consumers have very low willingn

Question 15

The simple case of pricing with market power assumes that (a)all consumers are charged the same price,(b)the firm sells one product,and (c)demand exists in one time period.Discuss what happens when each assumption is relaxed.

Accepted Answer

When a firm can sell at different prices

Question 16

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and another price to night customers,then the day price will be

Accepted Answer

A) $7.50. 
B) $5.50. 
C) $6.25. 
D) $10.00. 
A) $7.50. 
B) $5.50. 
C) $6.25. 
D) $10.00.

Question 17

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and another price to night customers,then the night price will be

Accepted Answer

A) $7.50. 
B) $5.50. 
C) $6.25. 
D) $10.00. 
A) $7.50. 
B) $5.50. 
C) $6.25. 
D) $10.00.

Question 18

Using cost plus pricing,what is the price if ATC = $14.50 and the target rate of return is 4 percent?

Accepted Answer

A) $15.10 
B) $49.34 
C) $14.5 
D) $22.10 
A) $15.10 
B) $49.34 
C) $14.5 
D) $22.10

Question 19

If Tiger Toys faces a demand curve of P = 85 − 0.25Q and a MC = ATC = 20,then the market price would be

Accepted Answer

A) $85.00. 
B) $52.50. 
C) $130.00. 
D) $32.50. 
A) $85.00. 
B) $52.50. 
C) $130.00. 
D) $32.50.

Question 20

Calculate the markup price if MC = $10.00 and price elasticity equals 1.7.

Accepted Answer

A) $5.88 
B) $17.24 
C) $24.27 
D) $32.42 
A) $5.88 
B) $17.24 
C) $24.27 
D) $32.42

Price discrimination requires that different customers have different levels of price sensitivity and that

Which of the following is a reason for firms to bundle products?

______ extracts the maximum amount each customer is willing to pay for a product.

The higher the price elasticity,the

A firm with market power in pricing faces a

Disney sold The Little Mermaid for $20 with a $5 mail in rebate.The rebate should have

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and a different price to night customers,then the profit will be

Using the linear approximation system to estimate the profit maximizing price requires that managers have information on the cost of production

Third-degree price discrimination results when a firm sells

If Tiger Toys faces a demand curve of P = 85 − 0.25Q and a MC = ATC = 20,then the markup would be

Refer to Figure 7.2.If Happy Times Theater charges one price to all customers,then that price will be

The simple case of pricing with market power assumes that (a)all consumers are charged the same price,(b)the firm sells one product,and (c)demand exists in one time period.Discuss what happens when each assumption is relaxed.

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and another price to night customers,then the day price will be

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and another price to night customers,then the night price will be

Using cost plus pricing,what is the price if ATC = $14.50 and the target rate of return is 4 percent?

If Tiger Toys faces a demand curve of P = 85 − 0.25Q and a MC = ATC = 20,then the market price would be

Calculate the markup price if MC = $10.00 and price elasticity equals 1.7.

Introduction

Economists View of Behavior

Exchange and Markets

Demand

Production and Cost

Market Structure

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: the Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: the Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters

Exam 7: Pricing With Market Power

Price discrimination requires that different customers have different levels of price sensitivity and that

Which of the following is a reason for firms to bundle products?

______ extracts the maximum amount each customer is willing to pay for a product.

The higher the price elasticity,the

A firm with market power in pricing faces a

Disney sold The Little Mermaid for $20 with a $5 mail in rebate.The rebate should have

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and a different price to night customers,then the profit will be

Using the linear approximation system to estimate the profit maximizing price requires that managers have information on the cost of production

Third-degree price discrimination results when a firm sells

If Tiger Toys faces a demand curve of P = 85 − 0.25Q and a MC = ATC = 20,then the markup would be

Refer to Figure 7.2.If Happy Times Theater charges one price to all customers,then that price will be

The simple case of pricing with market power assumes that (a)all consumers are charged the same price,(b)the firm sells one product,and (c)demand exists in one time period.Discuss what happens when each assumption is relaxed.

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and another price to night customers,then the day price will be

Refer to Figure 7.2.If Happy Times Theater charges one price to day customers and another price to night customers,then the night price will be

Using cost plus pricing,what is the price if ATC = $14.50 and the target rate of return is 4 percent?

If Tiger Toys faces a demand curve of P = 85 − 0.25Q and a MC = ATC = 20,then the market price would be

Calculate the markup price if MC = $10.00 and price elasticity equals 1.7.

Introduction

Economists View of Behavior

Exchange and Markets

Demand

Production and Cost

Market Structure

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: the Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: the Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters