Question 1

Cost-plus pricing would be consistent with selecting the profit-maximizing price when

Accepted Answer

A) it results in a price that causes quantity sold to be where marginal revenue equals marginal cost. 
B) a firm has no difficulty estimating its demand curve. 
C) consumers value the product beyond its marginal cost. 
D) the demand for the firm's product is unit-elastic. 
A) it results in a price that causes quantity sold to be where marginal revenue equals marginal cost. 
B) a firm has no difficulty estimating its demand curve. 
C) consumers value the product beyond its marginal cost. 
D) the demand for the firm's product is unit-elastic.

Question 2

The Clayton Act of 1936 outlawed price discrimination that reduced competition.

Accepted Answer

A) True 
 B)False

Question 3

Figure 16-2   Watanabe Sensei operates the only martial arts school in Hartfield.For simplicity,assume that consumers have identical demand curves and that Sensei knows what this demand curve is.Figure 16-2 shows this demand curve.
-Refer to Figure 16-2.If Sensei acts as a monopolist and charges the profit-maximizing price,what is his producer surplus?

Accepted Answer

A) the area B + D + G 
B) the area A + B + C + D + H + G 
C) the area C + D + H + G 
D) the area A + C + H 
A) the area B + D + G 
B) the area A + B + C + D + H + G 
C) the area C + D + H + G 
D) the area A + C + H

Question 4

The law of one price

Accepted Answer

A) states that consumers can only buy one good or service at a time. 
B) is a law passed by Congress that prohibits firms from selling a product at two different prices in the same market at the same time. 
C) states that consumers will pay any price for a product that has a perfectly inelastic demand curve. 
D) states that identical products should sell for the same price everywhere. 
A) states that consumers can only buy one good or service at a time. 
B) is a law passed by Congress that prohibits firms from selling a product at two different prices in the same market at the same time. 
C) states that consumers will pay any price for a product that has a perfectly inelastic demand curve. 
D) states that identical products should sell for the same price everywhere.

Question 5

Perfect price discrimination is also known as

Accepted Answer

A) monopoly. 
B) first-degree price discrimination. 
C) third-degree price discrimination. 
D) yield management. 
A) monopoly. 
B) first-degree price discrimination. 
C) third-degree price discrimination. 
D) yield management.

Question 6

A firm that engages in price discrimination must be able to identify the preferences of every
customer it serves.

Accepted Answer

A) True 
 B)False

Question 7

The price of admission to Walt Disney World

Accepted Answer

A) can vary by your age and address. 
B) is the same for everyone. 
C) is kept low to attract customers,but Disney earns most of its profits by selling tickets to rides and attractions inside the park. 
D) is kept low to attract customers,but prices of rides and attractions inside the park vary by your age,address and other factors. 
A) can vary by your age and address. 
B) is the same for everyone. 
C) is kept low to attract customers,but Disney earns most of its profits by selling tickets to rides and attractions inside the park. 
D) is kept low to attract customers,but prices of rides and attractions inside the park vary by your age,address and other factors.

Question 8

Which of the following pricing strategies allows a firm to earn economic profit?

Accepted Answer

A) price discrimination 
B) charging a price equal to marginal cost 
C) charging a price equal to the average total cost of production 
D) charging a price equal to the average variable cost of production 
A) price discrimination 
B) charging a price equal to marginal cost 
C) charging a price equal to the average total cost of production 
D) charging a price equal to the average variable cost of production

Question 9

In which market structure is it not possible to practice price discrimination?

Accepted Answer

A) perfect competition 
B) monopolistic competition 
C) oligopoly 
D) monopoly 
A) perfect competition 
B) monopolistic competition 
C) oligopoly 
D) monopoly

Question 10

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.If Julie charges $10 per hour,what is the value of the consumer surplus received by Dawn?

Accepted Answer

A) $2 
B) $10 
C) $12 
D) $22 
A) $2 
B) $10 
C) $12 
D) $22

Question 11

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.If Julie charges $10 per hour,how many hours of pet sitting services will be purchased and by whom?

Accepted Answer

A) 2 hours (1 hour by Cara and 1 hour by Dawn) 
B) 1 hour by Cara only 
C) 1 hour by Dawn only 
D) 3 hours (1 hour each by Arun,Bernice and Cara) 
A) 2 hours (1 hour by Cara and 1 hour by Dawn) 
B) 1 hour by Cara only 
C) 1 hour by Dawn only 
D) 3 hours (1 hour each by Arun,Bernice and Cara)

Question 12

Figure 16-2   Watanabe Sensei operates the only martial arts school in Hartfield.For simplicity,assume that consumers have identical demand curves and that Sensei knows what this demand curve is.Figure 16-2 shows this demand curve.
-Refer to Figure 16-2.If Sensei charges the competitive price for his classes,what is the maximum amount of admission fee that he can collect from his customers?

Accepted Answer

A) the area A + B 
B) the area A + B + C + D 
C) the area A + B + C + D + E 
D) the area A + C + D + G + H 
A) the area A + B 
B) the area A + B + C + D 
C) the area A + B + C + D + E 
D) the area A + C + D + G + H

Question 13

If Mort's House of Flowers sells one dozen roses to different customers at different prices,economists would consider this an example of

Accepted Answer

A) price gouging. 
B) rational ignorance. 
C) arbitrage. 
D) price discrimination. 
A) price gouging. 
B) rational ignorance. 
C) arbitrage. 
D) price discrimination.

Question 14

Which of the following is not a requirement for a successful price discrimination strategy?

Accepted Answer

A) A firm must have market power. 
B) The firm must be able to prevent consumers who buy a product at a low price from reselling it to other consumers at a high price. 
C) Managers must practice yield management. 
D) Some consumers must have greater willingness to pay for the product than other consumers,and the firm must be able to know what prices consumers are willing to pay. 
A) A firm must have market power. 
B) The firm must be able to prevent consumers who buy a product at a low price from reselling it to other consumers at a high price. 
C) Managers must practice yield management. 
D) Some consumers must have greater willingness to pay for the product than other consumers,and the firm must be able to know what prices consumers are willing to pay.

Question 15

Walt Disney began planning for Disneyland in the early 1950s.When he began to consider how the amusement park would be funded

Accepted Answer

A) he decided to use the profits earned from his company's cartoons and motion pictures. 
B) he had trouble raising the required funds.Eventually,he convinced a television network to fund the amusement park in exchange for providing a weekly television program. 
C) he decided to borrow money from Hollywood banks.The banks quickly agreed to loan Disney the money because of Disney's reputation and previous success. 
D) he had trouble raising the required funds from banks,so he decided to issue "Disney bonds." He had no trouble paying the interest and principal on the bonds with profits from Disneyland. 
A) he decided to use the profits earned from his company's cartoons and motion pictures. 
B) he had trouble raising the required funds.Eventually,he convinced a television network to fund the amusement park in exchange for providing a weekly television program. 
C) he decided to borrow money from Hollywood banks.The banks quickly agreed to loan Disney the money because of Disney's reputation and previous success. 
D) he had trouble raising the required funds from banks,so he decided to issue "Disney bonds." He had no trouble paying the interest and principal on the bonds with profits from Disneyland.

Question 16

Figure 16-2   Watanabe Sensei operates the only martial arts school in Hartfield.For simplicity,assume that consumers have identical demand curves and that Sensei knows what this demand curve is.Figure 16-2 shows this demand curve.
-Refer to Figure 16-2.With a two-part pricing scheme - a monopoly price for classes and a one-time membership fee - what is the amount of producer surplus Sensei will earn?

Accepted Answer

A) an amount equal to the area A + B + C + D 
B) an amount equal to the area E + F 
C) an amount equal to the area A + C + H 
D) an amount equal to the area A + B + C + D + H + G 
A) an amount equal to the area A + B + C + D 
B) an amount equal to the area E + F 
C) an amount equal to the area A + C + H 
D) an amount equal to the area A + B + C + D + H + G

Question 17

Figure 16-3   The Lizard Lounge is well known for its exotic cocktails.Figure 16-3 shows its estimated demand curve for cocktails.
-Refer to Figure 16-3.The owners of the Lizard Lounge are considering the following four pricing options: a.A single price scheme where the cocktail price equals the monopoly price.
B.A single price scheme where the cocktail price equals the competitive price.
C.A two-part tariff: a monopoly cocktail price and a cover charge that will generate total revenue equal to the area X.
D.A two-part tariff: a competitive cocktail price and whatever cover charge that will generate a total revenue equivalent to the area X + Y + Z.
Which pricing scheme(s)achieve the economically efficient outcome?

Accepted Answer

A) schemes a and c 
B) scheme b 
C) schemes b and d 
D) scheme d only 
A) schemes a and c 
B) scheme b 
C) schemes b and d 
D) scheme d only

Question 18

Which of the following is necessary in order for a firm to successfully practice price discrimination?

Accepted Answer

A) The firm must practice product differentiation. 
B) The demand for the firm's product is inelastic. 
C) The firm must be able to segment the market for the product. 
D) The firm's transactions costs must be zero. 
A) The firm must practice product differentiation. 
B) The demand for the firm's product is inelastic. 
C) The firm must be able to segment the market for the product. 
D) The firm's transactions costs must be zero.

Question 19

According to the law of one price,

Accepted Answer

A) if transaction costs are zero,identical goods should sell for the same price everywhere. 
B) if transactions costs are zero,firms must sell a product at a price equal to its marginal cost. 
C) if transactions costs are zero,all firms must earn the same profit margin. 
D) there must be no differences in the cost of producing identical goods by different producers. 
A) if transaction costs are zero,identical goods should sell for the same price everywhere. 
B) if transactions costs are zero,firms must sell a product at a price equal to its marginal cost. 
C) if transactions costs are zero,all firms must earn the same profit margin. 
D) there must be no differences in the cost of producing identical goods by different producers.

Question 20

The prices college students and faculty members pay for Apple computers are lower than the prices Apple charges on its Website 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.

Cost-plus pricing would be consistent with selecting the profit-maximizing price when

The Clayton Act of 1936 outlawed price discrimination that reduced competition.

The law of one price

Perfect price discrimination is also known as

A firm that engages in price discrimination must be able to identify the preferences of every customer it serves.

The price of admission to Walt Disney World

Which of the following pricing strategies allows a firm to earn economic profit?

In which market structure is it not possible to practice price discrimination?

If Mort's House of Flowers sells one dozen roses to different customers at different prices,economists would consider this an example of

Which of the following is not a requirement for a successful price discrimination strategy?

Walt Disney began planning for Disneyland in the early 1950s.When he began to consider how the amusement park would be funded

Which of the following is necessary in order for a firm to successfully practice price discrimination?

According to the law of one price,

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

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

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Exam 16: Pricing Strategy

Cost-plus pricing would be consistent with selecting the profit-maximizing price when

The Clayton Act of 1936 outlawed price discrimination that reduced competition.

The law of one price

Perfect price discrimination is also known as

A firm that engages in price discrimination must be able to identify the preferences of every customer it serves.

The price of admission to Walt Disney World

Which of the following pricing strategies allows a firm to earn economic profit?

In which market structure is it not possible to practice price discrimination?

If Mort's House of Flowers sells one dozen roses to different customers at different prices,economists would consider this an example of

Which of the following is not a requirement for a successful price discrimination strategy?

Walt Disney began planning for Disneyland in the early 1950s.When he began to consider how the amusement park would be funded

Which of the following is necessary in order for a firm to successfully practice price discrimination?

According to the law of one price,

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

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