Question 1

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Accepted Answer

A) yield management. 
B) elasticity management. 
C) brand management. 
D) marketing. 
A) yield management. 
B) elasticity management. 
C) brand management. 
D) marketing.

Question 2

Which of the following will prevent firms from engaging in price discrimination?

Accepted Answer

A) yield management 
B) arbitrage 
C) transactions costs 
D) odd pricing 
A) yield management 
B) arbitrage 
C) transactions costs 
D) odd pricing

Question 3

Suppose Dublin Electronics charges regular customers $90 for a Blu-ray player but allows senior citizens to purchase the same item for $75.Is this likely to be a successful price discriminating strategy?

Accepted Answer

A) Yes,firms price discriminate to maximize profits. 
B) No,price discrimination will not be effective because the store cannot prevent senior citizens from buying large quantities of Blu-ray players and reselling them for a profit. 
C) Yes,because senior citizens are likely to have a more elastic demand and therefore will be willing to pay a lower price compared to regular customers. 
D) No,because there are many different brands of Blu-ray players and consumers will shop around. 
A) Yes,firms price discriminate to maximize profits. 
B) No,price discrimination will not be effective because the store cannot prevent senior citizens from buying large quantities of Blu-ray players and reselling them for a profit. 
C) Yes,because senior citizens are likely to have a more elastic demand and therefore will be willing to pay a lower price compared to regular customers. 
D) No,because there are many different brands of Blu-ray players and consumers will shop around.

Question 4

Which of the following is not an advantage of cost-plus pricing?

Accepted Answer

A) It is easy to calculate. 
B) It requires little information. 
C) If a firm is selling multiple products,it ensures that the firm's prices will cover costs that are difficult to assign to one product. 
D) It ensures that the firm will maximize its profits. 
A) It is easy to calculate. 
B) It requires little information. 
C) If a firm is selling multiple products,it ensures that the firm's prices will cover costs that are difficult to assign to one product. 
D) It ensures that the firm will maximize its profits.

Question 5

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 each customer according to his or her willingness to pay instead of a uniform price of $7.Which of the following statements is true?

Accepted Answer

A) Julie is worse off because the demand for her services is reduced. 
B) Julie has converted the consumer surplus (from a uniform price)into economic profit. 
C) Julie's customers are better off because their consumer surplus has increased. 
D) Julie's has converted the producer surplus (from a uniform price)into consumer surplus. 
A) Julie is worse off because the demand for her services is reduced. 
B) Julie has converted the consumer surplus (from a uniform price)into economic profit. 
C) Julie's customers are better off because their consumer surplus has increased. 
D) Julie's has converted the producer surplus (from a uniform price)into consumer surplus.

Question 6

Price discrimination is the practice of

Accepted Answer

A) charging different prices for the same good when the price differences are not due to differences in cost. 
B) charging different prices for the same good when the price differences arise because of differences in cost. 
C) charging different prices for different qualities of a product. 
D) charging higher prices for brand named goods and lower prices for generic versions of the goods. 
A) charging different prices for the same good when the price differences are not due to differences in cost. 
B) charging different prices for the same good when the price differences arise because of differences in cost. 
C) charging different prices for different qualities of a product. 
D) charging higher prices for brand named goods and lower prices for generic versions of the goods.

Question 7

Even though it often does not result in profit maximization,some small firms use a cost-plus pricing strategy anyway because

Accepted Answer

A) it is easy to use. 
B) they do not understand what marginal revenue and marginal cost mean. 
C) it is expensive to hire an economist who can determine what the profit-maximizing price is. 
D) they sell several products,each of which sells for a different price.The time and expense involved in finding the profit-maximizing price for each product are not worth the effort. 
A) it is easy to use. 
B) they do not understand what marginal revenue and marginal cost mean. 
C) it is expensive to hire an economist who can determine what the profit-maximizing price is. 
D) they sell several products,each of which sells for a different price.The time and expense involved in finding the profit-maximizing price for each product are not worth the effort.

Question 8

Which of the following statements about two-part tariffs is false?

Accepted Answer

A) Because each individual has a different individual demand curve,if there is just one entrance fee some consumers will be able to reap some consumer surplus. 
B) The producer cannot capture the entire consumer surplus because the entrance fee might discourage some potential consumers even though they would have been willing to pay a lesser entrance fee. 
C) Two-part tariff pricing allows a producer to capture the entire consumer surplus. 
D) For two-part tariff pricing to be successful,the producer must be able to identify two distinct customer groups. 
A) Because each individual has a different individual demand curve,if there is just one entrance fee some consumers will be able to reap some consumer surplus. 
B) The producer cannot capture the entire consumer surplus because the entrance fee might discourage some potential consumers even though they would have been willing to pay a lesser entrance fee. 
C) Two-part tariff pricing allows a producer to capture the entire consumer surplus. 
D) For two-part tariff pricing to be successful,the producer must be able to identify two distinct customer groups.

Question 9

The University of Kansas is using a two-part tariff pricing structure since they require season ticket holders for Jayhawks football games to purchase ________ to obtain seats in its new Gridiron Club.

Accepted Answer

A) tickets to preseason games as well as regular season games 
B) sports mortgages in addition to the season tickets 
C) a minimum of two season tickets to each home game 
D) season tickets for Jayhawks basketball 
A) tickets to preseason games as well as regular season games 
B) sports mortgages in addition to the season tickets 
C) a minimum of two season tickets to each home game 
D) season tickets for Jayhawks basketball

Question 10

Early adopters are consumers who will pay a high price to be among the first to own new products.

Accepted Answer

A) True 
 B)False

Question 11

Arnold Marion,a first-year economics student at Fazer College,was given an assignment to find an example of price discrimination and present it to his class.When asked for his example Arnold said "I went to a Milwaukee Brewers baseball game with my cousin last week.We paid $25 each for our seats in left field.My aunt and uncle paid $50 each for their tickets; they sat five rows behind the first base dugout.This is an example of price discrimination since we paid different prices for the same product,and the differences were not due to differences in costs." How would Arnold's economics instructor assess Arnold's example?

Accepted Answer

A) He would agree with Arnold that he had found an example of price discrimination,but would add that arbitrage would occur if ticket scalpers sold Brewers tickets for more than the prices Arnold and his uncle paid. 
B) He would disagree with Arnold's example because the $25 seats and the $50 seats were not the same products. 
C) He would agree with Arnold that he had found an example of price discrimination and would explain that the elasticity of demand for Brewers tickets is different for Arnold and his uncle. 
D) He would disagree with Arnold's example because there were differences in transactions costs for the $50 tickets and the $25 tickets. 
A) He would agree with Arnold that he had found an example of price discrimination,but would add that arbitrage would occur if ticket scalpers sold Brewers tickets for more than the prices Arnold and his uncle paid. 
B) He would disagree with Arnold's example because the $25 seats and the $50 seats were not the same products. 
C) He would agree with Arnold that he had found an example of price discrimination and would explain that the elasticity of demand for Brewers tickets is different for Arnold and his uncle. 
D) He would disagree with Arnold's example because there were differences in transactions costs for the $50 tickets and the $25 tickets.

Question 12

A perfectly competitive firm cannot practice price discrimination because

Accepted Answer

A) a firm that breaks even in the long run cannot afford to engage in yield management. 
B) it does not advertise; this prevents the firm from marketing its product to different segments of the market. 
C) each consumer in a perfectly competitive market has the same willingness to pay. 
D) the firm can only charge the market price. 
A) a firm that breaks even in the long run cannot afford to engage in yield management. 
B) it does not advertise; this prevents the firm from marketing its product to different segments of the market. 
C) each consumer in a perfectly competitive market has the same willingness to pay. 
D) the firm can only charge the market price.

Question 13

When Disneyland opened in 1955,what prices were charged for admission and rides?

Accepted Answer

A) Admission was free; customers paid for rides. 
B) All customers paid the same price for admission; rides were free. 
C) Admission prices varied by your age,home address and occupation; rides were free. 
D) All customers paid the same low price for admission; customers were also charged prices for rides. 
A) Admission was free; customers paid for rides. 
B) All customers paid the same price for admission; rides were free. 
C) Admission prices varied by your age,home address and occupation; rides were free. 
D) All customers paid the same low price for admission; customers were also charged prices for rides.

Question 14

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost,the efficient level of output.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Consumers who will pay high prices to be among the first to own certain new products are called

Accepted Answer

A) savvy consumers. 
B) naive consumers. 
C) gullible. 
D) early adopters. 
A) savvy consumers. 
B) naive consumers. 
C) gullible. 
D) early adopters.

Question 17

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.Sensei's friend,Marcel,suggests that he charge a one-time membership fee to use the martial arts school,in addition to a per-class charge.Suppose Sensei charges the monopoly price for each class and also imposes a one-time membership fee.What is the maximum amount of revenue from the membership fee he can collect from all his customers?

Accepted Answer

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

Question 18

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

Accepted Answer

A) A firm must have the ability to charge a price greater than marginal cost. 
B) Some consumers must have a 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. 
C) The firm must be able to prevent arbitrage. 
D) Transactions costs must be the same for all consumers. 
A) A firm must have the ability to charge a price greater than marginal cost. 
B) Some consumers must have a 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. 
C) The firm must be able to prevent arbitrage. 
D) Transactions costs must be the same for all consumers.

Question 19

Many golf courses charge members an annual membership fee as well as a fee each time they golf.One reason for this is

Accepted Answer

A) golf courses do not want their members to overuse their fairways.Charging for each round of golf played reduces fairway maintenance costs. 
B) charging both fees allows the courses to transfer more consumer surplus into profit than charging only an admission fee. 
C) charging both fees allows the courses to transfer more producer surplus into profit than charging only an admission fee. 
D) research has shown that charging both fees increases the likelihood that golfers will renew their memberships. 
A) golf courses do not want their members to overuse their fairways.Charging for each round of golf played reduces fairway maintenance costs. 
B) charging both fees allows the courses to transfer more consumer surplus into profit than charging only an admission fee. 
C) charging both fees allows the courses to transfer more producer surplus into profit than charging only an admission fee. 
D) research has shown that charging both fees increases the likelihood that golfers will renew their memberships.

Question 20

The following table contains the actual prices charged by four Websites for the PlayStation 3 game Batman: Arkham City in December 2011.
   Explain whether the information in this table contradicts the law of one price.

Accepted Answer

The data in the table does see

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Which of the following will prevent firms from engaging in price discrimination?

Suppose Dublin Electronics charges regular customers $90 for a Blu-ray player but allows senior citizens to purchase the same item for $75.Is this likely to be a successful price discriminating strategy?

Which of the following is not an advantage of cost-plus pricing?

Price discrimination is the practice of

Even though it often does not result in profit maximization,some small firms use a cost-plus pricing strategy anyway because

Which of the following statements about two-part tariffs is false?

The University of Kansas is using a two-part tariff pricing structure since they require season ticket holders for Jayhawks football games to purchase ________ to obtain seats in its new Gridiron Club.

Early adopters are consumers who will pay a high price to be among the first to own new products.

A perfectly competitive firm cannot practice price discrimination because

When Disneyland opened in 1955,what prices were charged for admission and rides?

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost,the efficient level of output.

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.

Consumers who will pay high prices to be among the first to own certain new products are called

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

Many golf courses charge members an annual membership fee as well as a fee each time they golf.One reason for this is

The following table contains the actual prices charged by four Websites for the PlayStation 3 game Batman: Arkham City in December 2011. Explain whether the information in this table contradicts the law of one price.

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

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Which of the following will prevent firms from engaging in price discrimination?

Suppose Dublin Electronics charges regular customers $90 for a Blu-ray player but allows senior citizens to purchase the same item for $75.Is this likely to be a successful price discriminating strategy?

Which of the following is not an advantage of cost-plus pricing?

Price discrimination is the practice of

Even though it often does not result in profit maximization,some small firms use a cost-plus pricing strategy anyway because

Which of the following statements about two-part tariffs is false?

The University of Kansas is using a two-part tariff pricing structure since they require season ticket holders for Jayhawks football games to purchase ________ to obtain seats in its new Gridiron Club.

Early adopters are consumers who will pay a high price to be among the first to own new products.

A perfectly competitive firm cannot practice price discrimination because

When Disneyland opened in 1955,what prices were charged for admission and rides?

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost,the efficient level of output.

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.

Consumers who will pay high prices to be among the first to own certain new products are called

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

Many golf courses charge members an annual membership fee as well as a fee each time they golf.One reason for this is

The following table contains the actual prices charged by four Websites for the PlayStation 3 game Batman: Arkham City in December 2011. Explain whether the information in this table contradicts the law of one price.

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