Deck 18: Pricing Policies

Question 1

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.50 per minute,what is the difference in profit per customer compared to when it charges the marginal cost?

A) $6.25
B) $25
C) $3.13
D) $34.37

Answer 1

$3.13

Question 2

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.50 per minute,what is the difference in total profit compared to when it charges the marginal cost?

A) $1,250
B) $5,000
C) $626
D) $6,874

Answer 2

$626

Question 3

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.25 per minute,what is Always There's total profit?

A) $30,626
B) $39,376
C) $40,000
D) $35,000

Answer 3

$30,626

Question 4

A telephone company that charges both a monthly fee plus a price per minute used are employing

A) Quality dependent pricing
B) Ordinary price discrimination
C) A two-part tariff
D) Quantity dependent pricing

Question 5

Price discrimination is based on self-selection

A) When a firm can distinguish consumers with a high versus low willingness to pay
B) When a firm offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay
C) When a monopolist knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit
D) When a firm cannot distinguish consumers with a high versus low willingness to pay

Question 6

When a supermarket charges more per ounce for a small bottle of ketchup than a larger one,it is engaging in

A) Price discrimination based on observable customer characteristics
B) Perfect price discrimination
C) Quantity-dependent pricing
D) Quality-dependent pricing

Question 7

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.50 per minute,how many minutes will each customer buy each month?

A) 200
B) 150
C) 175
D) 250

Question 8

A firm engages in price discrimination when it

A) Charges different prices for different units of different goods
B) Charges same prices for different units of the same good
C) Charges a lower price for units for which the willingness to pay is high than for those units for which the willingness to pay is low
D) Charges different prices for different units of the same good

Question 9

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.25 per minute,how large of a fixed monthly fee can it charge and still persuade customers to buy their service?

A) $200
B) $153.13
C) $306.25
D) $175

Question 10

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.What price per ticket does the theater charge students to maximize profits?

A) $4
B) $7
C) $6
D) $12

Question 11

A monopolist can perfectly price discriminate

A) When it can distinguish consumers with a high versus low willingness to pay
B) When it offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay
C) If it knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit
D) When it cannot distinguish consumers with a high versus low willingness to pay

Question 12

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.50 per minute,how large of a fixed monthly fee can it charge and still persuade customers to buy their service?

A) $200
B) $150
C) $225
D) $112.5

Question 13

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.How many tickets does the theater sell to students to maximize profits?

A) 2500
B) 500
C) 200
D) 600

Question 14

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.25 per minute,how many minutes will each customer buy each month?

A) 175
B) 200
C) 2
D) 225

Question 15

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.25 per minute,what is Always There's profit per customer?

A) $153.13
B) $196.88
C) $200
D) $175

Question 16

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.50 per minute,what is Always There's profit per customer?

A) $153.13
B) $150
C) $187.50
D) $37.50

Question 17

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.What is the monopolist's profit from students?

A) $400
B) $2400
C) $2500
D) $0

Question 18

With a two-part tariff

A) Consumers simply pay a fixed fee if they buy anything at all
B) Consumers pay a fixed fee if they buy anything at all, plus a separate per-unit price for each unit they buy
C) Consumers pay a fixed fee if they buy anything at all, plus an annual fee for the right to purchase anything
D) Consumers simply pay a fee for the right to buy anything

Question 19

Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of ,where P is the per-minute price in dollars.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.50 per minute,what is Always There's total profit?

A) $30,626
B) $30,000
C) $37,500
D) $7,500

Question 20

Price discrimination is based on observable customer characteristics

A) When a firm can distinguish consumers with a high versus low willingness to pay
B) When a firm offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay
C) A monopolist knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit
D) When a firm cannot distinguish consumers with a high versus low willingness to pay

Question 21

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.30 per minute.What is the highest fixed fee Always There Wireless could charge without losing the low-demand consumers?

A) $28.13
B) $56.26
C) $24.50
D) $49.00

Question 22

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.30 per minute.How many minutes will low-demand consumers purchase?

A) 60
B) 30
C) 70
D) 170

Question 23

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater cannot price discriminate.What is the monopolist's profit from both students and adults?

A) $2500
B) $4950
C) $2450
D) $50

Question 24

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.25 per minute.What are the profits from sales to each of the high-demand consumers?

A) $9.38
B) $28.13
C) $153.13
D) $1.00

Question 25

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.25 per minute.What are Always There Wireless's total profits?

A) $3752
B) $11,253
C) $61,252
D) $400

Question 26

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.35 per minute.How many minutes will high-demand consumers purchase?

A) 65
B) 35
C) 75
D) 165

Question 27

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.What is the monopolist's profit from both students and adults?

A) $2900
B) $2500
C) $2100
D) $4900

Question 28

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.25 per minute.What are the profits from sales to each of the low-demand consumers?

A) $9.38
B) $28.13
C) $153.13
D) $1.00

Question 29

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.30 per minute.What is the profit from sales to each of the low-demand consumers?

A) $28.00
B) $24.50
C) $33.00
D) $28.13

Question 30

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.30 per minute.How many minutes will high-demand consumers purchase?

A) 60
B) 30
C) 70
D) 170

Question 31

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.What is the monopolist's profit from adults?

A) $400
B) $2400
C) $2500
D) $0

Question 32

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.25 per minute.How much can Always There Wireless charge as a fixed fee without losing the low-demand consumers?

A) $9.38
B) $28.13
C) $153.13
D) $1.00

Question 33

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.What is the difference in the monopolist's profit when it is able to price discriminate and when it cannot?

A) $2500
B) $400
C) $0
D) $50

Question 34

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.30 per minute.What is Always There Wireless's total profit?

A) $11,200
B) $13,200
C) $11,700
D) $12,700

Question 35

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.How many tickets does the theater sell to adults to maximize profits?

A) 2500
B) 500
C) 200
D) 600

Question 36

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.30 per minute.What is the profit from sales to each of the high-demand consumers?

A) $28.00
B) $24.50
C) $33.00
D) $28.13

Question 37

A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.What price per ticket does the theater charge adults to maximize profits?

A) $4
B) $7
C) $6
D) $12

Question 38

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.35 per minute.How many minutes will low-demand consumers purchase?

A) 65
B) 35
C) 75
D) 165

Question 39

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.25 per minute.How many minutes will high-demand consumers purchase?

A) 75
B) 175
C) 200
D) 100

Question 40

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.25 per minute.How many minutes will low-demand consumers purchase?

A) 75
B) 175
C) 200
D) 100

Question 41

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.35 per minute.What is the highest fixed fee Always There Wireless can charge without losing the low-demand consumers?

A) $21.13
B) $42.25
C) $28.13
D) $136.13

Question 42

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.35 per minute.What is Always There Wireless's profit from sales for each high-demand consumer?

A) $27.63
B) $37.63
C) $21.13
D) $28.13

Question 43

Bundling

A) Is the practice of selling a single product in bulk at a reduced per unit price
B) Is the practice of selling several products together as a package
C) Is the practice of selling the same good to different types of consumers at different prices
D) Is the practice of selling different goods to different types of consumers at different prices

Question 44

Bundling always increases a multi product monopolist's profit

A) Whenever an increase of a dollar in the willingness to pay for one good implies a reduction of a dollar in the willingness to pay for another good and the marginal cost is zero
B) Whenever an increase of a dollar in the willingness to pay for one good implies an increase in the willingness to pay for another good and the marginal cost is zero
C) When doing so does not alter consumers' willingness to pay for the bundle and the monopolist can extract all of aggregate surplus as profit
D) Whenever a decrease of a dollar in the willingness to pay for one good implies an increase in the willingness to pay for another good and the marginal cost is zero

Question 45

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.35 per minute.What is Always There Wireless's total profit?

A) $11,253
B) $12,052
C) $11,052
D) $8,452

Question 46

Discuss the differences between perfect and imperfect price discrimination and the benefits of each to a monopolist.

Question 47

Firms bundle their products because

A) It is technologically efficient to do so
B) It can increase a firm's ability to extract consumer surplus
C) It can increase a firm's profits
D) All of these

Question 48

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Which price per minute is the most profitable?

A) $0.35
B) $0.40
C) $0.50
D) $0.60

Question 49

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.35 per minute.What is Always There Wireless's profit from sales for each low-demand consumer?

A) $27.63
B) $37.63
C) $21.13
D) $28.13

Question 50

Mixed bundling

A) Is the practice of selling several products together as a package
B) Is the practice of selling the same good to different types of consumers at different prices
C) Is the practice of selling several products together as a package while also offering those products for sale individually
D) Is the practice of selling goods in bulk at a reduced per unit price

Question 51

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Which price per minute is the most profitable?

A) $0.35
B) $0.50
C) $0.60
D) $0.70

Question 52

Explain bundling and mixed bundling and the benefits to a multi product monopolist of such packaging schemes.