Question 1

Which of the following firms is not able to practice price discrimination?

Accepted Answer

A) movie theaters 
B) commercial airlines 
C) land-line telephone companies 
D) the largest wheat farmer in Nebraska 
A) movie theaters 
B) commercial airlines 
C) land-line telephone companies 
D) the largest wheat farmer in Nebraska

Question 2

Figure 16-1  
-Refer to Figure 16-1.What is the price charged under perfect price discrimination?

Accepted Answer

A) P3 
B) P4 
C) a range of prices corresponding to the demand curve from P3 and above 
D) a range of prices corresponding to the demand curve from P4 and above 
A) P3 
B) P4 
C) a range of prices corresponding to the demand curve from P3 and above 
D) a range of prices corresponding to the demand curve from P4 and above

Question 3

The network of devices directly communicating data to a computer without a person having to enter the data is known as

Accepted Answer

A) Big Data. 
B) Artificial Intelligence. 
C) the Internet of Things. 
D) Synergistic Communications. 
A) Big Data. 
B) Artificial Intelligence. 
C) the Internet of Things. 
D) Synergistic Communications.

Question 4

A firm using a two-part tariff faces a tradeoff because

Accepted Answer

A) the only way to increase the fixed-fee portion of the price is to lower the per-unit portion of the price. 
B) the only way to increase total revenue is to lower per-unit profit. 
C) any increase in consumer surplus must be offset by a decrease in producer surplus. 
D) the smaller the variation between the parts of the price,the greater the deadweight loss generated by the pricing scheme. 
A) the only way to increase the fixed-fee portion of the price is to lower the per-unit portion of the price. 
B) the only way to increase total revenue is to lower per-unit profit. 
C) any increase in consumer surplus must be offset by a decrease in producer surplus. 
D) the smaller the variation between the parts of the price,the greater the deadweight loss generated by the pricing scheme.

Question 5

Are sellers who practice arbitrage taking advantage of buyers?

Accepted Answer

No,because the seller cannot charge a bu

Question 6

Which of the following are necessary conditions for successful price discrimination? 
A.zero transactions costs
B.a perfectly competitive market structure
C.an imperfectly competitive market structure
D.at least two different markets with different price elasticities of demand
E.at least two different markets with different price elasticities of supply

Accepted Answer

A) a,b,and d only 
B) c and d only 
C) a,c,d,and e only 
D) a and c only 
A) a,b,and d only 
B) c and d only 
C) a,c,d,and e only 
D) a and c only

Question 7

Figure 16-5  
-Refer to Figure 16-5.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the revenue collected from the fixed fee portion of the price?

Accepted Answer

A) $10,240 
B) $7,870 
C) $2,560 
D) $1,440 
A) $10,240 
B) $7,870 
C) $2,560 
D) $1,440

Question 8

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 16-6 shows this demand curve.
-Refer to Figure 16-6.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 9

Which of the following is a reason why a firm would not engage in price discrimination?

Accepted Answer

A) Price discrimination is illegal in some western states and the owners of firms in these states face civil or criminal prosecution if they engage in price discrimination. 
B) Some firms are not able to segment the market for the products they sell. 
C) Some firms do not want to violate the law of one price. 
D) The transactions costs associated with selling the product exceed the price of the product. 
A) Price discrimination is illegal in some western states and the owners of firms in these states face civil or criminal prosecution if they engage in price discrimination. 
B) Some firms are not able to segment the market for the products they sell. 
C) Some firms do not want to violate the law of one price. 
D) The transactions costs associated with selling the product exceed the price of the product.

Question 10

The following table contains the actual prices charged by four Web sites for a 3D Collector's Edition Blu-ray disc of the movie Marvel's Avengers: Age of Ultron in November 2015.
 $$\begin{array} { | l | c | } 
\hline \text { Amazon } & \$ 24.99 \
\hline \text { Walmart } & 25.48 \
\hline \text { Best Buy } & 29.99 \
\hline \text { Disney Store } & 29.99 \
\hline
\end{array}$$ Explain whether the information in this table contradicts the law of one price.

Accepted Answer

Unless there are big differenc

Question 11

Many clothing manufacturers are able to practice price discrimination by selling products in department stores and also in outlet stores.

Accepted Answer

A) True 
 B)False

Question 12

Article Summary
Brandeis University economist Benjamin Shiller has written a paper which explains how Netflix could combine demographic data with customers' Web browsing habits to more accurately predict how much a customer would be willing to pay for a Netflix subscription,and how using this method of first-degree price discrimination would generate higher profits.Shiller explains that the more information a company has about its customers,the better it is at being able to set prices to increase profits.As he stated in his paper,"Using all variables to tailor prices,one can yield variable profits 1.39 percent higher than variable profits obtained using non-tailored 2nd degree price-discrimination.Using demographics alone to tailor prices raises profits by much less,yielding variable profits only 0.14% higher than variable profits attainable under 2nd degree [price discrimination]."
-Refer to the Article Summary.If Netflix chose to use Shiller's pricing method

Accepted Answer

A) consumer surplus would be zero. 
B) producer surplus would be zero. 
C) deadweight loss would be maximized. 
D) consumer surplus,producer surplus,and deadweight loss would all be equal. 
A) consumer surplus would be zero. 
B) producer surplus would be zero. 
C) deadweight loss would be maximized. 
D) consumer surplus,producer surplus,and deadweight loss would all be equal.

Question 13

Which of the following statements is true?

Accepted Answer

A) Consumer surplus under perfect price discrimination is greater than under single-price monopoly pricing. 
B) Consumer surplus under an optimal two-part tariff is greater than that under single-price monopoly pricing. 
C) Although consumers reap some consumer surplus under a single-price monopoly,society is better off with optimal two-part tariff pricing. 
D) Of the three pricing schedules,single-price monopoly,an optimal two-part tariff,and perfect price discrimination,profit is highest under single-price monopoly pricing. 
A) Consumer surplus under perfect price discrimination is greater than under single-price monopoly pricing. 
B) Consumer surplus under an optimal two-part tariff is greater than that under single-price monopoly pricing. 
C) Although consumers reap some consumer surplus under a single-price monopoly,society is better off with optimal two-part tariff pricing. 
D) Of the three pricing schedules,single-price monopoly,an optimal two-part tariff,and perfect price discrimination,profit is highest under single-price monopoly pricing.

Question 14

Figure 16-5  
-Refer to Figure 16-5.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the quantity it should produce?

Accepted Answer

A) 240 units 
B) 320 units 
C) 480 units 
D) 560 units 
A) 240 units 
B) 320 units 
C) 480 units 
D) 560 units

Question 15

When a firm charges $4.95 instead of $5.00,what do economists call this pricing strategy?

Accepted Answer

A) cost-plus pricing 
B) indirect pricing 
C) odd pricing 
D) unusual pricing 
A) cost-plus pricing 
B) indirect pricing 
C) odd pricing 
D) unusual pricing

Question 16

Figure 16-1  
-Refer to Figure 16-1.What is the economically efficient output level?

Accepted Answer

A) Q1 units 
B) Q2 units 
C) Q3 units 
D) Q4 units 
A) Q1 units 
B) Q2 units 
C) Q3 units 
D) Q4 units

Question 17

Consider the following actions undertaken by a firm: 
A.charging a higher price for products of higher quality
B.charging different prices to different consumers for the same product when the variation cannot be explained by cost differences
C.charging different prices for products of different qualities
D.charging a lower price to match a competitor's price
Which of the above will be considered price discrimination?

Accepted Answer

A) a,b,c,and d 
B) a,b,and d only 
C) b and d only 
D) b only 
A) a,b,c,and d 
B) a,b,and d only 
C) b and d only 
D) b only

Question 18

Assume a firm is able to use an optimal two-part tariff.
a.Is the outcome economically efficient? Why or why not?
b.What happens to consumer surplus?
c.Does this represent perfect price discrimination? Why or why not?

Accepted Answer

a.If a firm uses an optimal two-part tar

Question 19

If the selling price of a firm's product is $500 and the estimated average cost of producing this product is $400,what is the firm's markup?

Accepted Answer

A) 15 percent 
B) 20 percent 
C) 25 percent 
D) 40 percent 
A) 15 percent 
B) 20 percent 
C) 25 percent 
D) 40 percent

Question 20

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

Exam 16: Pricing Strategy

Which of the following firms is not able to practice price discrimination?

Figure 16-1 -Refer to Figure 16-1.What is the price charged under perfect price discrimination?

The network of devices directly communicating data to a computer without a person having to enter the data is known as

A firm using a two-part tariff faces a tradeoff because

Are sellers who practice arbitrage taking advantage of buyers?

Figure 16-5 -Refer to Figure 16-5.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the revenue collected from the fixed fee portion of the price?

Which of the following is a reason why a firm would not engage in price discrimination?

Many clothing manufacturers are able to practice price discrimination by selling products in department stores and also in outlet stores.

Which of the following statements is true?

Figure 16-5 -Refer to Figure 16-5.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the quantity it should produce?

When a firm charges $4.95 instead of $5.00,what do economists call this pricing strategy?

Figure 16-1 -Refer to Figure 16-1.What is the economically efficient output level?

Assume a firm is able to use an optimal two-part tariff. a.Is the outcome economically efficient? Why or why not? b.What happens to consumer surplus? c.Does this represent perfect price discrimination? Why or why not?

If the selling price of a firm's product is $500 and the estimated average cost of producing this product is $400,what is the firm's markup?

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.

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

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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