Deck 8: Pricing

Question 1

Consider an increase in freight rates that adds 50 cents to the average cost of goods at a sporting goods store. How should the store adjust the price of tennis rackets?

A) Do not change the price.
B) Raise price by 25 cents per item.
C) Raise price by 50 cents per item.
D) None of the above.

Answer 1

D

Question 2

Consider an airline using uniform pricing. How should it adjust its pricing as the demand for air travel become more inelastic in the weeks leading up to Thanksgiving?

A) Raise the incremental margin percentage.
B) Raise the price.
C) Raise the marginal cost.
D) All of the above.

Answer 2

A

Question 3

Google continuously auctions slots for advertisements on its own and third-party websites. An advertiser may pay different prices for each slot, depending on the competition among the bids. What type of pricing policy is Google approximating?

A) Complete price discrimination.
B) Direct segment discrimination.
C) Indirect segment discrimination.
D) Uniform pricing.

Answer 3

A

Question 4

A manufacturer of Covid-19 vaccines sets higher prices in China than Indonesia. Under what conditions does this pricing policy increase profit?

A) Demand in China is less price elastic than in Indonesia.
B) Chinese consumers must not be able to buy from Indonesia.
C) a and b.
D) None of the above.

Question 5

Why is price discrimination more common in personal services such as career counselling and financial advice than other types of services?

A) Demand for personal services is less price elastic.
B) It is more difficult to resell personal services.
C) a and b.
D) None of the above.

Question 6

Many movie studios stagger the release of movies - first in theaters, next streaming and cable TV, and then free-to-air TV. What type of pricing policy are they applying?

A) Complete price discrimination.
B) Direct segment discrimination.
C) Indirect segment discrimination.
D) Uniform pricing.

Question 7

Why is direct segment discrimination more profitable than indirect segment discrimination?

A) The seller can set prices according to some characteristic of the buyers.
B) Buyers cannot choose to purchase the cheaper product.
C) a and b.
D) None of the above.

Question 8

Since complete price discrimination is the most profitable pricing policy, would you recommend that all businesses apply it rather than direct and indirect segment discrimination?

A) It depends on the available information about buyers.
B) The seller must be able to prevent resale of the product.
C) Under some circumstances, it yields the same profit as direct segment discrimination.
D) a and b.
E) All of the above.

Question 9

Consider a publisher that delivers news through the Internet. Using technology, it can easily customize the news according to the reader's preference. How would this help in pricing?

A) It differentiates the product and helps to segment customers.
B) It reduces the marginal cost of the product.
C) a and b.
D) None of the above.

Question 10

Why do airlines limit the number of cheap fares as compared with more expensive fares?

A) Raises profit.
B) Limits cannibalization of more expensive fares.
C) Reduces the marginal cost.
D) All of the above.

Question 11

Consider an increase in freight rates which adds 50 cents to the average cost of goods at a sporting goods store. How should the store adjust its prices?

Question 12

How would the price elasticity of the demand for air travel change in the weeks leading up to Thanksgiving? Consider an airline using uniform pricing. How should it adjust its pricing?

Question 13

Google continuously auctions slots for advertisements on its own and third-party websites. An advertiser may pay different prices for each slot, depending on the competition among the bids. What type of pricing policy is Google approximating?

Question 14

A manufacturer of Covid-19 vaccines sets higher prices in China than Indonesia. What conditions are necessary for this pricing policy to work?

Question 15

Why is price discrimination more common in personal services such as career counselling and financial advice than other types of services?

Question 16

Many movie studios stagger the release of movies - first in theatres, next streaming and cable TV, and then free-to-air TV. What type of pricing policy are they applying?

Question 17

Why is direct segment discrimination more profitable than indirect segment discrimination?

Question 18

Since complete price discrimination is the most profitable pricing policy, would you recommend that all businesses apply it rather than direct and indirect segment discrimination?

Question 19

Consider a publisher that delivers news through the Internet. Using technology, it can easily customize the news according to the reader's preference. How would this help in pricing?

Question 20

Why do airlines limit the number of cheap fares as compared with more expensive fares?