Question 1

Which of the following is needed for successful price discrimination?

Accepted Answer

A) The firm must have a high market share. 
B) The firm must have more than one product line. 
C) The firm must be able to engage in arbitrage. 
D) The firm must have some consumers whose demand is relatively price inelastic. 
A) The firm must have a high market share. 
B) The firm must have more than one product line. 
C) The firm must be able to engage in arbitrage. 
D) The firm must have some consumers whose demand is relatively price inelastic.

Question 2

We would expect price discrimination to be most successful in the market for:

Accepted Answer

A) haircuts. 
B) DVD's. 
C) cars. 
D) jeans. 
A) haircuts. 
B) DVD's. 
C) cars. 
D) jeans.

Question 3

A two-part tariff involves:

Accepted Answer

A) a fixed entry fee plus a variable per-unit price. 
B) a variable entry fee plus a variable per-unit price. 
C) a fixed entry fee plus a fixed per-unit price. 
D) a variable entry fee plus a fixed per-unit price. 
A) a fixed entry fee plus a variable per-unit price. 
B) a variable entry fee plus a variable per-unit price. 
C) a fixed entry fee plus a fixed per-unit price. 
D) a variable entry fee plus a fixed per-unit price.

Question 4

Which of the following consumer segments are benefited by price discrimination?

Accepted Answer

A) Consumers with high income 
B) Consumers with perfectly inelastic demand 
C) Consumers with highly elastic demand 
D) Consumers with more than one source of income 
A) Consumers with high income 
B) Consumers with perfectly inelastic demand 
C) Consumers with highly elastic demand 
D) Consumers with more than one source of income

Question 5

With a two-part tariff,consumers pay:

Accepted Answer

A) a constant "average" price per unit of output. 
B) higher prices for purchasing greater quantities of output. 
C) an "average" price per unit of output that declines with the quantity purchased. 
D) a flat fee followed by an increasing per unit price. 
A) a constant "average" price per unit of output. 
B) higher prices for purchasing greater quantities of output. 
C) an "average" price per unit of output that declines with the quantity purchased. 
D) a flat fee followed by an increasing per unit price.

Question 6

Which of the following is the best example of intertemporal price discrimination?

Accepted Answer

A) Awarding financial aid to offset college tuition fees 
B) Releasing movies on DVD six months after they are released in a theater 
C) Charging less for a second pizza after the consumer has paid the full price for the first pizza 
D) Charging people with health care insurance more for medical care relative to those without insurance 
A) Awarding financial aid to offset college tuition fees 
B) Releasing movies on DVD six months after they are released in a theater 
C) Charging less for a second pizza after the consumer has paid the full price for the first pizza 
D) Charging people with health care insurance more for medical care relative to those without insurance

Question 7

Which of the following is true of arbitrage?

Accepted Answer

A) It is the revenue from the sale of a used product. 
B) It is the resale of a product among market segments. 
C) It is the profit from initial sales of a product. 
D) It is the ability of a firm to discriminate prices among customers. 
A) It is the revenue from the sale of a used product. 
B) It is the resale of a product among market segments. 
C) It is the profit from initial sales of a product. 
D) It is the ability of a firm to discriminate prices among customers.

Question 8

Which of the following is true of a price-discriminating monopolist who is selling output in two distinct markets?

Accepted Answer

A) Price will be higher in the market in which demand is unit-elastic. 
B) Price will be lower in the market in which demand is more elastic. 
C) Price will be equal in each market,as long as there is a constant marginal cost. 
D) Price will be lower in the market for which there are fewer substitute goods. 
A) Price will be higher in the market in which demand is unit-elastic. 
B) Price will be lower in the market in which demand is more elastic. 
C) Price will be equal in each market,as long as there is a constant marginal cost. 
D) Price will be lower in the market for which there are fewer substitute goods.

Question 9

Consider two markets segments,X and Y,for product A.The price elasticity of demand for product A in market X is 1.5,while the same in market Y is 3.The monopolist is selling product A in both the markets at a price of $300.Which of the following statements is true about the marginal revenue earned by the non-price discriminating monopolist from the two markets?

Accepted Answer

A) The monopolist earns $77.78 more from market Y. 
B) The monopolist earns $99.9 more from market X. 
C) The monopolist earns $88.89 more from market Y. 
D) The monopolist earns $11.11 more from market X. 
A) The monopolist earns $77.78 more from market Y. 
B) The monopolist earns $99.9 more from market X. 
C) The monopolist earns $88.89 more from market Y. 
D) The monopolist earns $11.11 more from market X.

Question 10

Which of the following is not an example of price discrimination?

Accepted Answer

A) A restaurant sets a fixed cover charge in addition to menu charges. 
B) A phone company charges different rates to residential and business users. 
C) An electric company charges different rates to senior citizens and younger adults. 
D) An airline sets different fares for adults and children. 
A) A restaurant sets a fixed cover charge in addition to menu charges. 
B) A phone company charges different rates to residential and business users. 
C) An electric company charges different rates to senior citizens and younger adults. 
D) An airline sets different fares for adults and children.

Question 11

The following figure shows the downward sloping demand and marginal revenue [MR] curves of a monopolist.The MR curve intersects the marginal cost [MC] curve at point B.MC is constant at the price level PS1U1B11S1U1B0.
Figure 12-1  
-Refer to Figure 12-1.If the monopolist cannot price discriminate,deadweight loss will be equal to:

Accepted Answer

A) the area P3AP2. 
B) the area P3CP1. 
C) the area ABC. 
D) zero. 
A) the area P3AP2. 
B) the area P3CP1. 
C) the area ABC. 
D) zero.

Question 12

When a two-part tariff is employed on consumers with identical demand curves,the maximum entry fee the firm can charge:

Accepted Answer

A) is represented by the total area below the demand curve. 
B) is equal to the total consumer surplus. 
C) is equal to the total cost. 
D) is equal to the average total cost. 
A) is represented by the total area below the demand curve. 
B) is equal to the total consumer surplus. 
C) is equal to the total cost. 
D) is equal to the average total cost.

Question 13

Suppose Amazon.com were to charge each consumer a different price,according to his or her willingness to pay for the latest novel in the Twilight series.The firm would be engaging in:

Accepted Answer

A) peak-load pricing. 
B) first-degree price discrimination. 
C) second-degree price discrimination. 
D) third-degree price discrimination. 
A) peak-load pricing. 
B) first-degree price discrimination. 
C) second-degree price discrimination. 
D) third-degree price discrimination.

Question 14

Which of the following strategies will allow a monopolist to earn higher profits by employing a two-part tariff on consumers with different demands?

Accepted Answer

A) Setting price equal to the marginal cost 
B) Setting price above the marginal cost 
C) Setting an entry fee equal to the consumer surplus 
D) Setting an entry fee higher than the consumer surplus 
A) Setting price equal to the marginal cost 
B) Setting price above the marginal cost 
C) Setting an entry fee equal to the consumer surplus 
D) Setting an entry fee higher than the consumer surplus

Question 15

A profit-maximizing monopoly firm that sells output in two distinct markets,A and B,will be in equilibrium when:

Accepted Answer

A) the price in each market is equal to its marginal cost of production. 
B) the marginal revenue in each market is equal to the price in that particular market. 
C) the marginal revenue in each market is equal to its marginal cost of production. 
D) the gap between price and marginal cost is maximized in each market. 
A) the price in each market is equal to its marginal cost of production. 
B) the marginal revenue in each market is equal to the price in that particular market. 
C) the marginal revenue in each market is equal to its marginal cost of production. 
D) the gap between price and marginal cost is maximized in each market.

Question 16

The following figure shows the indifference curves US1U1B11S1U1B0 and US1U1B12S1U1B0 of a consumer choosing between hours devoted at a tennis club and other goods.All consumers in this market have identical demand curves.IZ is the original budget line of a representative consumer,which shifts to AB when the club begins to charge an entry fee.
Figure 12-3  
-In Figure 12-3,if the fee goes above _____,the consumer will purchase no court hours.

Accepted Answer

A) OZ 
B) IA 
C) EF 
D) OE 
A) OZ 
B) IA 
C) EF 
D) OE

Question 17

Why is popcorn so expensive at the movies? Make a case for each of the following - that the high price of popcorn is price discrimination and that it is not price discrimination.Identify all the factors that are or are not present,enabling price discrimination by the theatre owner.
This question is based on Steven Landsburg (1995),The Armchair Economist: Economics and Everyday Life.

Accepted Answer

Price discrimination requires 3 main fac

Question 18

Peak-load pricing is typically introduced when:

Accepted Answer

A) there are several competing firms. 
B) resale of the product is relatively easy. 
C) production costs vary in different time periods. 
D) consumer demands are highly stable. 
A) there are several competing firms. 
B) resale of the product is relatively easy. 
C) production costs vary in different time periods. 
D) consumer demands are highly stable.

Question 19

Under peak-load pricing,the price in each period is set:

Accepted Answer

A) equal to the average cost of production in that period. 
B) above the marginal cost of production in that period. 
C) where the marginal cost intersects the demand for that period. 
D) where the average cost intersects the demand for that period. 
A) equal to the average cost of production in that period. 
B) above the marginal cost of production in that period. 
C) where the marginal cost intersects the demand for that period. 
D) where the average cost intersects the demand for that period.

Question 20

The following figure shows the downward sloping demand and marginal revenue [MR] curves of a monopolist.The MR curve intersects the marginal cost [MC] curve at point B.MC is constant at the price level PS1U1B11S1U1B0.
Figure 12-1  
-Refer to Figure 12-1.If the monopolist perfectly price discriminates,deadweight loss will be equal to:

Accepted Answer

A) area P3AP2. 
B) area P3CP1. 
C) area ABC. 
D) zero. 
A) area P3AP2. 
B) area P3CP1. 
C) area ABC. 
D) zero.

Which of the following is needed for successful price discrimination?

We would expect price discrimination to be most successful in the market for:

A two-part tariff involves:

Which of the following consumer segments are benefited by price discrimination?

With a two-part tariff,consumers pay:

Which of the following is the best example of intertemporal price discrimination?

Which of the following is true of arbitrage?

Which of the following is true of a price-discriminating monopolist who is selling output in two distinct markets?

Which of the following is not an example of price discrimination?

When a two-part tariff is employed on consumers with identical demand curves,the maximum entry fee the firm can charge:

Suppose Amazon.com were to charge each consumer a different price,according to his or her willingness to pay for the latest novel in the Twilight series.The firm would be engaging in:

Which of the following strategies will allow a monopolist to earn higher profits by employing a two-part tariff on consumers with different demands?

A profit-maximizing monopoly firm that sells output in two distinct markets,A and B,will be in equilibrium when:

Peak-load pricing is typically introduced when:

Under peak-load pricing,the price in each period is set:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 12: Product Pricing With Monopoly Power

Which of the following is needed for successful price discrimination?

We would expect price discrimination to be most successful in the market for:

A two-part tariff involves:

Which of the following consumer segments are benefited by price discrimination?

With a two-part tariff,consumers pay:

Which of the following is the best example of intertemporal price discrimination?

Which of the following is true of arbitrage?

Which of the following is true of a price-discriminating monopolist who is selling output in two distinct markets?

Which of the following is not an example of price discrimination?

When a two-part tariff is employed on consumers with identical demand curves,the maximum entry fee the firm can charge:

Suppose Amazon.com were to charge each consumer a different price,according to his or her willingness to pay for the latest novel in the Twilight series.The firm would be engaging in:

Which of the following strategies will allow a monopolist to earn higher profits by employing a two-part tariff on consumers with different demands?

A profit-maximizing monopoly firm that sells output in two distinct markets,A and B,will be in equilibrium when:

Peak-load pricing is typically introduced when:

Under peak-load pricing,the price in each period is set:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters