Question 1

If a firm knew every consumer's willingness to pay and could prevent arbitrage it could charge every consumer a different price.This practice is known as

Accepted Answer

A) first-degree exploitation,or perfect price discrimination. 
B) maximization of producer surplus,or perfect price discrimination. 
C) first-degree price discrimination,or perfect price discrimination. 
D) first-degree transfer of consumer surplus,or perfect price discrimination. 
A) first-degree exploitation,or perfect price discrimination. 
B) maximization of producer surplus,or perfect price discrimination. 
C) first-degree price discrimination,or perfect price discrimination. 
D) first-degree transfer of consumer surplus,or perfect price discrimination.

Question 2

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 3

Assume that a monopolist practices perfect price discrimination.The firm's marginal revenue curve will

Accepted Answer

A) be perfectly elastic. 
B) be equal to its demand curve. 
C) will be perfectly inelastic. 
D) will lie below its demand curve. 
A) be perfectly elastic. 
B) be equal to its demand curve. 
C) will be perfectly inelastic. 
D) will lie below its demand curve.

Question 4

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 5

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

Accepted Answer

A) examples of zero sum games,since the value of the goods sold is exactly equal to the prices paid for them. 
B) unproductive since the goods sold have been produced in the past. 
C) examples of exploitation of buyers of the goods by the sellers. 
D) examples of arbitrage. 
A) examples of zero sum games,since the value of the goods sold is exactly equal to the prices paid for them. 
B) unproductive since the goods sold have been produced in the past. 
C) examples of exploitation of buyers of the goods by the sellers. 
D) examples of arbitrage.

Question 6

Figure 16-1   Chantal owns a hairdressing salon which caters to two main groups of customers: residents of "The Chateau," a retirement community,and other residents in the neighborhood.Figure 16-1 shows the demand curves for the residents of the retirement community,labeled Market A,and other residents in the neighborhood,labeled Market B.The demand curves are not identical.
-Refer to Figure 16-1.What prices are charged in the two markets?

Accepted Answer

A) price in market A = price in market B = $15 
B) price in market A = $10; price in market B = $15 
C) price in market A = price in market B = $5 
D) price in market A = price in market B = $10 
A) price in market A = price in market B = $15 
B) price in market A = $10; price in market B = $15 
C) price in market A = price in market B = $5 
D) price in market A = price in market B = $10

Question 7

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.

Question 8

Many new sports stadiums are paid for with public funds,or a combination of public and private funds.Requiring those who have season tickets for a professional sports team to pay for equity seat rights in a new stadium which has been paid in full or in part with public funds shifts more of the burden of paying for a new stadium to ________ rather than ________.

Accepted Answer

A) the season ticket holders; the general public. 
B) the owners of the sports team; the season ticket holders. 
C) the city in which the stadium is located; the season ticket holders 
D) the general public; the city in which the stadium is located. 
A) the season ticket holders; the general public. 
B) the owners of the sports team; the season ticket holders. 
C) the city in which the stadium is located; the season ticket holders 
D) the general public; the city in which the stadium is located.

Question 9

Many firms use technology to gather information on the preferences of consumers and their responses to changes in prices.This information is then used to adjust prices of the firms' goods and services.This practice is called

Accepted Answer

A) price discovery. 
B) empirical research. 
C) yield management. 
D) econometrics. 
A) price discovery. 
B) empirical research. 
C) yield management. 
D) econometrics.

Question 10

Racial discrimination and other forms of discrimination based on irrelevant factors are illegal.Can price discrimination be illegal as well?

Accepted Answer

In 1936,Congress passed the Robinson-Pat

Question 11

The Walt Disney Company is in a position to use a two-part tariff policy in setting prices for admission and rides at Disney World.If this strategy resulted in maximum profit,Disney would convert all consumer surplus into profit.Which of the following explains why Disney does not maximize its profits from admission and rides?

Accepted Answer

A) To maximize its profits,Disney would have to know the demand curves of each of its customers.Since this is not possible,Disney is not able to convert all consumer surplus into profit. 
B) Disney purposely charges less than the profit-maximizing price for admission to Disney World because it does not want to risk alienating its customers. 
C) Disney purposely charges less than the profit-maximizing price for admission to Disney World in order to earn more profit from sales of food,lodging and other related services. 
D) Disney does not charge the profit-maximizing price for admission because it wants to keep admission affordable for children who will be more likely to visit Disney World when they become parents. 
A) To maximize its profits,Disney would have to know the demand curves of each of its customers.Since this is not possible,Disney is not able to convert all consumer surplus into profit. 
B) Disney purposely charges less than the profit-maximizing price for admission to Disney World because it does not want to risk alienating its customers. 
C) Disney purposely charges less than the profit-maximizing price for admission to Disney World in order to earn more profit from sales of food,lodging and other related services. 
D) Disney does not charge the profit-maximizing price for admission because it wants to keep admission affordable for children who will be more likely to visit Disney World when they become parents.

Question 12

Table 16-1
   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 16-1 below shows a portion of her survey results.
-Refer to Table 16-1.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 the value of consumer surplus by her customers?

Accepted Answer

A) $39 
B) $28 
C) $11 
D) $0 
A) $39 
B) $28 
C) $11 
D) $0

Question 13

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

Accepted Answer

A) clothing items sold through Macy's Department Store 
B) a hamburger sold at Burger King 
C) a cafe latte sold at Starbucks 
D) tickets to matinee shows at a movie theatre 
A) clothing items sold through Macy's Department Store 
B) a hamburger sold at Burger King 
C) a cafe latte sold at Starbucks 
D) tickets to matinee shows at a movie theatre

Question 14

Figure 16-1   Chantal owns a hairdressing salon which caters to two main groups of customers: residents of "The Chateau," a retirement community,and other residents in the neighborhood.Figure 16-1 shows the demand curves for the residents of the retirement community,labeled Market A,and other residents in the neighborhood,labeled Market B.The demand curves are not identical.
-Refer to Figure 16-1.Suppose Chantal practices price discrimination.Which of the following statements is true?

Accepted Answer

A) Chantal's profits will be higher if she has uniform pricing instead of different prices for different groups of customers. 
B) By charging a higher price in market B,Chantal has transferred some of the consumer surplus from customers in market B to customers in market A. 
C) By charging different prices in markets A and B,Chantal can transfer some producer surplus into economic profit. 
D) By charging a higher price in market B,Chantal can convert some consumer surplus into economic profit. 
A) Chantal's profits will be higher if she has uniform pricing instead of different prices for different groups of customers. 
B) By charging a higher price in market B,Chantal has transferred some of the consumer surplus from customers in market B to customers in market A. 
C) By charging different prices in markets A and B,Chantal can transfer some producer surplus into economic profit. 
D) By charging a higher price in market B,Chantal can convert some consumer surplus into economic profit.

Question 15

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand,the price in the market segment with more-elastic customer demand will be

Accepted Answer

A) greater than $34. 
B) less than $34. 
C) less than marginal revenue in that market segment. 
D) equal to marginal revenue in that market segment. 
A) greater than $34. 
B) less than $34. 
C) less than marginal revenue in that market segment. 
D) equal to marginal revenue in that market segment.

Question 16

One reason why airlines charge business travelers and leisure travelers different prices is

Accepted Answer

A) business travelers fly according to schedules that are planned months in advance.Many leisure travelers buy their tickets at the last minute. 
B) business travelers usually travel alone.Leisure travelers often fly with friends and family members; therefore,they have a more inelastic demand for airline tickets than business travelers. 
C) business travelers fly more often than most leisure travelers.As a result,their employers are able to bargain with airlines for lower fares than leisure travelers pay. 
D) business travelers often have inflexible schedules and have to travel on a particular day.The opposite is true for leisure travelers. 
A) business travelers fly according to schedules that are planned months in advance.Many leisure travelers buy their tickets at the last minute. 
B) business travelers usually travel alone.Leisure travelers often fly with friends and family members; therefore,they have a more inelastic demand for airline tickets than business travelers. 
C) business travelers fly more often than most leisure travelers.As a result,their employers are able to bargain with airlines for lower fares than leisure travelers pay. 
D) business travelers often have inflexible schedules and have to travel on a particular day.The opposite is true for leisure travelers.

Question 17

Charging different prices to different consumers for the same product when the price differences are not due to differences in cost is called arbitrage.

Accepted Answer

A) True 
 B)False

Question 18

A price-discriminating firm charges the highest price to

Accepted Answer

A) the group with the largest demand. 
B) the group with the most elastic demand. 
C) the group with the least elastic demand. 
D) the group with demand that is unit-elastic. 
A) the group with the largest demand. 
B) the group with the most elastic demand. 
C) the group with the least elastic demand. 
D) the group with demand that is unit-elastic.

Question 19

Consider a discount retailer such as Costco which uses a two-part tariff pricing strategy.The Costco membership fee

Accepted Answer

A) buys the consumer the right to make future purchases at Costco. 
B) is a resalable asset to the consumer. 
C) is a resalable asset to the producer. 
D) is used by Costco to cover its fixed costs of production. 
A) buys the consumer the right to make future purchases at Costco. 
B) is a resalable asset to the consumer. 
C) is a resalable asset to the producer. 
D) is used by Costco to cover its fixed costs of production.

Question 20

Table 16-1
   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 16-1 below shows a portion of her survey results.
-Refer to Table 16-1.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7.How many hours will be purchased and what is her total revenue?

Accepted Answer

A) 5 hours; total revenue = $35 
B) 4 hours; total revenue = $28 
C) 3 hours; total revenue = $21 
D) 2 hours; total revenue = $14 
A) 5 hours; total revenue = $35 
B) 4 hours; total revenue = $28 
C) 3 hours; total revenue = $21 
D) 2 hours; total revenue = $14

If a firm knew every consumer's willingness to pay and could prevent arbitrage it could charge every consumer a different price.This practice is known as

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

Assume that a monopolist practices perfect price discrimination.The firm's marginal revenue curve will

Arbitrage refers to the act of

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

Transactions costs refer to

Many firms use technology to gather information on the preferences of consumers and their responses to changes in prices.This information is then used to adjust prices of the firms' goods and services.This practice is called

Racial discrimination and other forms of discrimination based on irrelevant factors are illegal.Can price discrimination be illegal as well?

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand,the price in the market segment with more-elastic customer demand will be

One reason why airlines charge business travelers and leisure travelers different prices is

Charging different prices to different consumers for the same product when the price differences are not due to differences in cost is called arbitrage.

A price-discriminating firm charges the highest price to

Consider a discount retailer such as Costco which uses a two-part tariff pricing strategy.The Costco membership fee

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

If a firm knew every consumer's willingness to pay and could prevent arbitrage it could charge every consumer a different price.This practice is known as

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

Assume that a monopolist practices perfect price discrimination.The firm's marginal revenue curve will

Arbitrage refers to the act of

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

Transactions costs refer to

Many firms use technology to gather information on the preferences of consumers and their responses to changes in prices.This information is then used to adjust prices of the firms' goods and services.This practice is called

Racial discrimination and other forms of discrimination based on irrelevant factors are illegal.Can price discrimination be illegal as well?

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand,the price in the market segment with more-elastic customer demand will be

One reason why airlines charge business travelers and leisure travelers different prices is

Charging different prices to different consumers for the same product when the price differences are not due to differences in cost is called arbitrage.

A price-discriminating firm charges the highest price to

Consider a discount retailer such as Costco which uses a two-part tariff pricing strategy.The Costco membership fee

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