Deck 16: Pricing Strategy

Question 1

The Athenian Theatre sells play tickets for the same play at different prices: a lower price to those who opt for the seats at the back of the theatre and a higher price for those who purchase seats in the front,around the stage.Which of the following statements is true?

A) This is an example of product differentiation but not price discrimination.
B) The theatre practices first-degree price discrimination by setting prices based on willingness to pay.
C) Since the cost of producing the play does not change with the seating configuration, this is evidence of price discrimination based on market segmentation.
D) Charging two different prices is an effective way to avoid an excess demand for play tickets; the higher price lowers quantity demanded to some extent.

Answer 1

A

Question 2

For many products,such as fast foods,a variety of prices can be found,but sellers with higher prices can expect to sell their products because

A) consumers are not sensitive to prices.
B) arbitrage will quickly eliminate price differences.
C) firms differentiate products in many ways, for example, higher priced fast food restaurants may offer better service.
D) their demand is perfectly inelastic.

Answer 2

C

Question 3

Price discrimination

A) is the practice of charging different prices to different customers based on a seller's personal preferences and prejudices.
B) is the practice of charging different prices to different customers based on the different costs of supplying the product to different customers.
C) is the practice of charging different prices to different customers when the price differences cannot be attributed to variations in cost.
D) is the practice of giving preferential treatment to certain groups of customers based on their long-standing relationship to the producer.

Answer 3

C

Question 4

The act of buying a product at a low price in one market and reselling the product at a higher price in another market is called arbitrage.

Question 5

Lou buys an Iron Man 2 poster from Evan for $30 and resells it on eBay for $60.Which of the following statements is false?

A) Lou has earned some arbitrage profits, assuming that transaction costs are negligible.
B) The transaction has made Evan worse off because he undersold the poster.
C) Lou has probably incurred some costs in connection with this sale.
D) It is possible that Evan has earned some producer surplus from this transaction.

Question 6

According to a New York Times article,shoppers from New York City have played a game of "retail arbitrage" by shopping at malls in Northern New Jersey,a state where there is no tax on clothing and shoes.Even after accounting for transaction costs,shoppers could still save money on their clothing and footwear purchases. Source: Ken Belson and Nate Schweber,"Sales Tax Cut in City May Dim Allure of Stores Across Hudson," New York Times,January 18,2007.
Is the term "arbitrage" correctly used here?

A) Yes, because shoppers were able to purchase items at lower prices even after deducting their transaction costs.
B) No, "arbitrage" means buying at a low price and reselling at a higher price but no resale takes place here.
C) Yes, arbitrage applies even if no resale takes place; in this case the profits are pocketed by the customers themselves.
D) No, "arbitrage" does not apply to markets that are not in the same geographic area.

Question 7

The law of one price states

A) federal and state statutes that prohibit price discrimination.
B) that all customers should pay the same price.
C) that identical products should sell for the same price everywhere.
D) government regulation of prices for all firms.

Question 8

The expenses you encounter when you buy in one market and sell in a distant market are known as

A) production costs.
B) fixed costs.
C) transactions costs.
D) sunk costs.

Question 9

When you buy at a low price in one market then sell at a higher price in another market you are engaging in

A) odd pricing.
B) arbitrage.
C) an antitrust prohibited practice.
D) price discrimination.

Question 10

The law of one price holds exactly only if

A) antitrust laws are being enforced.
B) buyers have complete information.
C) transactions costs are zero.
D) it is impossible for buyers to resell the good.

Question 11

Buying at a low price in one market and reselling at a higher price in another market will

A) not generate any profit because of transportation costs.
B) not generate any profit because of transactions costs.
C) eventually eliminate all of the price differences.
D) eventually eliminate most, but not necessarily all, of the price differences.

Question 12

Lou buys an Iron Man 2 poster at a garage sale for $30 and resells it on eBay to Kyle for $60.Which of the following statements is true?

A) The transaction has made Lou better off and Kyle worse off.
B) The transaction is economically inefficient.
C) The transaction has made Lou and Kyle better off.
D) It is not possible for Kyle to enjoy any consumer surplus from this transaction.

Question 13

Yield management is the practice of

A) determining production functions to minimize production costs.
B) forecasting competitors' responses to price changes.
C) using buyer data to rapidly adjust prices.
D) using information technology to find the best interest rate.

Question 14

A firm's efforts to increase profit by price discrimination can be undermined by

A) arbitrage by buyers.
B) consumer ignorance.
C) differences in elasticity of demand.
D) seller market power.

Question 15

Table 16-1

Table 16-1 shows the price for the novel, Harry Potter and The Deathly Hallows at four online bookstores.

-Refer to Table 16-1.Which of the following can one conclude from the data above?

A) The data provides clear evidence of price discrimination in online bookstore market.
B) Amazon.com is able to charge a lower price for the item because it is more cost efficient than the other three companies.
C) The item offered for sale is similar but not identical; the quality of service and delivery time might vary from store to store, which justifies the price differences.
D) BarnesandNoble.com and Amazon.com have deliberately under-priced their product to force the other two companies out of business.

Question 16

Arbitrage

A) is the act of buying an item at a low price and reselling the item at a higher price.
B) is the act of selling an item on consignment and collecting a huge portion of the proceeds to compensate for the seller's time.
C) is the act of buying an item at a low price, bundling it with another and selling the new package at a much higher price.
D) is any act of buying and selling that results in the seller earning an above normal profit.

Question 17

If firms differentiate their products in different ways and charge different price because of these differentiation factors,then

A) the law of one price is not violated.
B) transaction costs are being ignored.
C) the firm must not be maximizing profit.
D) demand must be perfectly elastic.

Question 18

In the real world,

A) all sellers charge one price equal to the marginal cost of production.
B) profitable sellers will set one price based on the average elasticity of demand of buyers.
C) many firms charge different prices based on consumers' willingness to pay.
D) all sellers charge one price set by the government.

Question 19

Assuming zero transaction cost,if your local grocer buys oranges at a low price from an orchard and resells them to you at a higher price,then the grocer's revenue minus costs is known as

A) arbitrage profits.
B) transactions profits.
C) pure profits.
D) excess profits.

Question 20

The law of one price states that identical products should sell for the same price everywhere as long as transactions costs are zero.

Question 21

Under what circumstances will the law of one price hold,and when might it not hold?

Question 22

Are sellers who practice arbitrage taking advantage of buyers?

Question 23

Why is price discrimination legal but not discrimination based on race or gender?

A) because price discrimination increases profits and therefore tax revenues for the government, but discrimination based on race or gender reduces tax revenues
B) because price discrimination reduces deadweight loss, but discrimination based on race or gender increases deadweight loss
C) because price discrimination involves charging people different prices based on their willingness to pay rather than on the basis of arbitrary characteristics
D) because price discrimination enables firms to increase output and employment, but race or gender based discrimination reduces employment

Question 24

Toot Sweets Bakery sells freshly baked muffins from 6.30 am at $1.20 per muffins.By 4 pm,the remaining muffins are marked down to $0.60 each.Which of the following statements is true?

A) Toot Sweets engages in price discrimination; a higher price for those who cannot wait and a lower price for those willing to wait until 4 pm.
B) Toot Sweets is trying to prevent the opportunity to make arbitrage profit.
C) Toot Sweets is trying to minimize its loss.
D) Toot Sweets has underestimated the demand for its muffins.

Question 25

Most movie theatres charge different prices to different groups of customers for movie admission but not on movie popcorn.Which of the following is a reason for this?

A) because the markup on movie popcorn is very high and movie theatres do not want to forego this source of revenue
B) because the demand for popcorn is very high relative to the demand for movie admissions
C) because it is easier to limit resale in movie admissions but not in popcorn
D) because the cost of operating a concession stand in a movie theatre is very high compared to the cost of showing a movie

Question 26

If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations,then it is engaging in

A) odd pricing.
B) cost-plus pricing.
C) price discrimination.
D) markup pricing.

Question 27

Consider the following actions undertaken by a firm: a.charging the same price for products of different 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?

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

Question 28

Firms price discriminate

A) to reduce the quantity sold so as to reduce production costs.
B) to increase profits.
C) to take advantage of customers.
D) to increase total economic surplus.

Question 29

Which of the following is not a way by which price discriminating firms can segment a market?

A) on the basis of time of purchase, for example long-distance calling
B) by requiring an advance purchase, for example air tickets
C) on basis of the buyer's location, for example requiring out-of-state students to pay higher tuition
D) on the basis of the supplier's marginal cost of production, for example requiring customers to pay a premium for customizing options

Question 30

The following table contains the actual prices charged by four Web sites for a DVD of the movie Captain America: The First Avenger in November 2011.
Explain whether the information in this table contradicts the law of one price.

Question 31

Which of the following undermines a firm's ability to engage in price discrimination?

A) the seller's market power
B) the inability to prevent resale of the product from one market segment to another
C) buyers having different elasticities of demand for the product
D) the seller's ability to segment the total market

Question 32

Successful price discrimination cannot take place if

A) the market is perfectly competitive.
B) the market can be segmented into different buyer groups.
C) customers are not able to resell the product.
D) the demand curve facing the firm is downward-sloping.

Question 33

Which of the following are necessary condition(s)for successful price discrimination? a.zero transaction cost
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

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

Question 34

Which of the following products allows the seller to identify different groups of consumers (segment the market)at virtually no cost?

A) early bird dinner specials
B) books sold online
C) a pair of Bose speakers
D) iPhones

Question 35

In a perfectly competitive market,in the long run,arbitrage profits will be bid away.

Question 36

Price discrimination is possible in which of the following market structures? a.perfect competition
B)monopoly
C)oligopoly
D)monopolistic competition

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

Question 37

Which of the following is a necessary condition for successful price discrimination?

A) The seller must possess market power.
B) The buyer must possess market power.
C) Transaction costs must be zero.
D) Buyers must have identical inelastic demands.

Question 38

Differentiating products to suit customers' tastes is a form of price discrimination.

Question 39

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

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

Question 40

Table 16-2

Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube.

-Refer to Table 16-2.How many tubes of toothpaste will Neem sell in Middle Fall and at what price?

A) Q = 2 units; P = $7
B) Q = 3 units; P = $6
C) Q = 4 units; P = $5
D) Q = 5 units; P = $4

Question 41

When colleges use yield management techniques,they

A) rank students on the basis of academic merit and award higher financial aid offers to those at the top of the ranking.
B) increase financial aid offers to students whose demand for college education is likely to be more price elastic and reduce financial aid offers to students whose demand for college education is likely to be less price elastic.
C) rank students on the basis of academic merit and award higher financial aid offers to those at the bottom of the ranking.
D) increase financial aid offers to students whose demand for college education is likely to be more price inelastic and reduce financial aid offers to students whose demand for college education is likely to be less price inelastic.

Question 42

Which of the following does not arise from price discrimination?

A) an increase in producer surplus
B) an increase in consumer surplus
C) an increase in quantity sold
D) an increase in profits

Question 43

Calling long distance is often more expensive on weekdays between 8 am and 5 pm than in the evening hours.Why is this the case?

A) Telephone companies hope to discourage customers from calling long distance during the day to keep their labor costs down.
B) The cost of making long-distance connections is higher during the day than in the evenings.
C) Businesses who must call suppliers or customers during business hours have few alternatives and therefore have an inelastic demand during the workday compared to after-work hours.
D) Increasingly, businesses who must call suppliers or customers during business hours resort to the internet, thereby reducing demand for long-distance calls. To make up for this fall in demand, telephone companies charge higher rates.

Question 44

Table 16-2

Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube.

-Refer to Table 16-2.What are the total profits from both markets combined?

A) $50
B) $48
C) $18
D) $15

Question 45

An article on how prices in South Bend,Indiana rise during Notre Dame home football games noted: "For the Sept.16 game against the University of Michigan,the South Bend Marriott is charging $649 a night for a double room.......The Marriott's regular weekend price is $149 a night." Source: Ilan Brat,"Notre Dame Football Introduces Its Fans To Inflationary Spiral,Wall Street Journal,September 7,2006,p.A1.
Which of the following statements is true?

A) The Marriott is practicing first-degree price discrimination by charging what the market will bear.
B) This is evidence of third-degree price discrimination because hotel accommodation on a particular day is not a product that can be resold later.
C) There is no evidence of price discrimination; the Marriott is responding to increased demand for hotel rooms in the face of constant supply.
D) The Marriott has adopted this pricing strategy to capitalize on arbitrage profits.

Question 46

Table 16-2

Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube.

-Refer to Table 16-2.Which of the following statements is true about the two markets?

A) The demand in Middle Fall is more price elastic than the demand in West Fall
B) The demand in Middle Fall is less price elastic than the demand in West Fall.
C) The demand in Middle Fall is more income elastic than the demand in West Fall.
D) The demand in Middle Fall is more income elastic than the demand in West Fall

Question 47

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1,200.Assume that Iris and Daphne do not know each other.If the price is $800 per copy,

A) both Iris and Daphne will purchase Joss's services and Joss will undertake the job.
B) only Daphne will purchase Joss's services and Joss will undertake the job for her.
C) only Daphne will want to purchase Joss's services but Joss will not be willing to do the work.
D) neither Iris nor Daphne will commission the work.

Question 48

The Bay Area subway system,BART,offers senior citizens discounted fares for BART rides.This suggests that BART authorities believe that senior citizens have a ________ demand for subway rides.

A) more income elastic
B) less income elastic
C) more price elastic
D) less price elastic

Question 49

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1,200.Assume that Iris and Daphne do not know each other.If the price is $500 per copy,

A) only Iris will purchase Joss's services and Joss will undertake the job for her.
B) only Daphne will purchase Joss's services and Joss will undertake the job for her.
C) both Iris and Daphne will purchase Joss's services and Joss will undertake the job.
D) both Iris and Daphne will want to purchase Joss's services but Joss will not be willing to undertake the job.

Question 50

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1,200.Assume that Iris and Daphne do not know each other.Which of the following statements is true?

A) Joss should charge each customer $600; that way he will earn his opportunity cost and it will be fair to both Iris and Daphne.
B) Joss should charge Iris $500 and Daphne no more than $700; that way he earns his opportunity cost and there is no loss in economic surplus.
C) Joss should charge Iris $500 and Daphne $800; that way economic surplus is maximized.
D) Joss should charge Iris $500 but charging Daphne $800 is unfair because it allows Joss to earn more than his opportunity cost.

Question 51

Table 16-2

Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube.

-Refer to Table 16-2.How many tubes of toothpaste will Neem sell in West Fall and at what price?

A) Q = 2 units; P = $4.50
B) Q = 3 units; P = $4
C) Q = 4 units; P = $3.50
D) Q = 5 units; P = $3

Question 52

For a firm that can effectively price discriminate,who will be charged a lower price?

A) customers who have an elastic demand for the product
B) customers who have an inelastic demand for the product
C) buyers that are members of the largest market segment
D) buyers that are members of the smallest market segment

Question 53

A firm that can effectively price discriminate will charge a higher price to

A) customers who have the more elastic demand for the product.
B) customers who have the more inelastic demand for the product.
C) buyers who belong to the largest market segment.
D) buyers who are members of the smallest market segment.

Question 54

From an economic perspective,price discrimination is desirable because

A) the increase in profits is more than offset by the loss in consumer surplus, resulting in a net increase in economic surplus.
B) it enables firms to increase profits with no loss in economic surplus, and in turn, this could provide firms with incentives to engage in beneficial product innovation.
C) the increase in profits results in higher corporate tax revenues received by the government which could be used to subsidize consumption for low-income individuals.
D) it redistributes wealth from wealthy consumers to highly innovative firms.

Question 55

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1,200.Assume that Iris and Daphne do not know each other.If Joss charges the same price per copy to both Iris and Daphne,

A) the report will not get written.
B) only Daphne will commission the job and the report will be written.
C) both Iris and Daphne will commission the job and the report will be written.
D) no conclusion can be drawn without information on the price.

Question 56

If a firm could practice perfect price discrimination,it would

A) allow resale of its product.
B) charge every buyer a different price.
C) charge a price based on the quantity of a product bought.
D) use odd pricing.

Question 57

Yield management and price discrimination have enabled firms to increase profits and,at the same time,

A) reduce the cost of production.
B) capture some consumer surplus.
C) reduce transactions costs.
D) transfer some producer surplus to consumers.

Question 58

With perfect price discrimination there is

A) no deadweight loss.
B) no producer surplus.
C) one single price.
D) an increase in consumer surplus.

Question 59

Which of the following is a reason why airline yield management is an effective method to increase revenue?

A) because airlines have invested heavily in developing computer models that identify optimal pricing strategies in the various market segments
B) because airlines have successfully induced customers to reveal their resources and preferences by offering them different versions of the product such as business class and coach plane tickets
C) because a ticket is a contract to transport a specific person, and is not transferable
D) because airlines have a monopoly in long-distance carriage.

Question 60

Table 16-2

Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube.

-Refer to Table 16-2.What is the total revenue received from both markets combined?

A) $30
B) $34
C) $68
D) $70

Question 61

Consider the following pricing strategies: a.perfect price discrimination
B)charging different prices to different groups of customers
C)optimal two-part tariff
D)single-price monopoly pricing
Which of the pricing strategies allows a producer to capture the entire consumer surplus that would have gone to consumers under perfect competitive pricing?

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

Question 62

Some consumer electronic products such as plasma TVs,DVD players and digital cameras,are introduced at very high prices but over time,their prices start falling (beyond what could be attributed to falling costs as companies take advantage of economies of scale and cheaper technologies).Which of the following is the best explanation for this observation?

A) More firms are likely to enter the consumer electronic market over time, forcing market prices down.
B) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait.
C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods.
D) After satisfying the demand for early adopters, firms lower price to attract the more price sensitive consumers.

Question 63

Figure 16-2
Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population. Figure 16-2 shows the demand curves for the two groups of customers.

-Refer to Figure 16-2.Suppose Plato Playhouse charges a single price of Pd for each performance.Which of the following statements is true?

A) The company is selling more than the profit-maximizing quantity in the non-student market and less than the profit-maximizing quantity in the student market.
B) The company is selling less than the profit-maximizing quantity in the non-student market and more than the profit-maximizing quantity in the student market.
C) The company is selling less than the profit-maximizing quantity in both markets but it is maximizing its revenue.
D) The company is selling less than the profit-maximizing quantity in both markets.

Question 64

In 2011,Netflix was charging $23.98 per month to rent three DVDs at a time as well as receive unlimited streaming.Although all subscribers under this plan pay the same rate,they do not receive the same quality of service.Subscribers who rent the fewest movies per month have the best chance of receiving the latest releases (for which there is usually a wait list)and will typically receive their DVDs faster.Is Netflix engaging in price discrimination,and if so,why?

A) No, it is not; it is merely differentiating its product by offering different levels of service.
B) No, it is not; as long as there is a wait list, Netflix must devise a rationing mechanism. Its decision to give priority to those who rent only a few DVDs is a business strategy independent of pricing.
C) Yes it is; Netflix is charging the same price for two different levels of service. It does this to increase its profit.
D) Yes it is; Netflix wants to discourage those who rent many DVDs per month because they lower the firm's profits.

Question 65

Consider the following pricing strategies: a.perfect price discrimination
B)charging different prices to different groups of customers
C)optimal two-part tariff
D)single-price monopoly pricing
Which of the pricing strategies leads to the economically efficient output level?

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

Question 66

When colleges use yield management techniques,they increase financial aid offers to students likely to be more price sensitive and they reduce financial aid offers to students likely to be less price sensitive.

Question 67

If a monopolist engages in first-degree price discrimination,it will produce the same output level as a perfectly competitive industry.

Question 68

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

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 69

Figure 16-1
Refer to Figure 16-1.What is the consumer surplus received under perfect price discrimination?

A) the area under the demand curve above P1
B) the area under the demand curve above P3
C) the area under the demand curve above P4
D) zero

Question 70

The antitrust law that prohibits price discrimination on grounds that it reduces competition is

A) the Clayton Act.
B) the Federal Trade Commission Act.
C) the Robinson-Patman Act.
D) the Sherman Act.

Question 71

To successfully price discriminate,a firm must ensure that there are no opportunities for arbitrage.

Question 72

Figure 16-2
Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population. Figure 16-2 shows the demand curves for the two groups of customers.

-Refer to Figure 16-2.Suppose Plato Playhouse price discriminates.Which of the following statements is true?

A) By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby increasing economic efficiency.
B) By charging two different prices, the theatre company essentially allows those willing to pay higher prices to subsidize those who are not.
C) By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby improving equity.
D) Plato Playhouse will earn higher profits if it charges a single price an average of the two prices instead of charging two different prices to the two different groups of customers.

Question 73

Figure 16-2
Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population. Figure 16-2 shows the demand curves for the two groups of customers.

-Refer to Figure 16-2.What is the price charged in the two markets?

A) price in the student market = price in the non-student market = P_a
B) price in the student market = price in the non-student market = P_b
C) price in the student market = P_d; price in the non-student market = P_e
D) price in the student market = P_c; price in the non-student market = P_e

Question 74

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

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

Question 75

Figure 16-2
Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population. Figure 16-2 shows the demand curves for the two groups of customers.

-Refer to Figure 16-2.What is the quantity sold to each group of customer and what is the total quantity sold?

A) quantity sold to students=Q_b; quantity sold to non-students=Q_b; total sales=Q_a
B) quantity sold to students=Q_c; quantity sold to non-students=Q_b; total sales=Q_b+Q_c
C) quantity sold to students=Q_c; quantity sold to non-students=Q_e; total sales=Q_e+Q_c
D) quantity sold to students=Q_c; quantity sold to non-students=Q_d; total sales=Q_d+Q_c

Question 76

Colleges offer merit awards to students who ordinarily would not qualify for financial help.Some have criticized this on grounds that merit awards disproportionately benefit students from wealthier communities with better school systems,siphoning resources away from lower-income students with greater financial need.A college's decision to grant merit awards is motivated by economic efficiency.

Question 77

In 2009,Netflix was charging $16.99 per month to rent three DVDs at a time.Although all subscribers under this plan pay the same rate,they do not receive the same quality of service.Subscribers who rent the fewest movies per month have the best chance of receiving the latest releases (for which there is usually a wait list)and will typically receive their DVDs faster.Based on the information above,what can you conclude about the price elasticity of demand for Netflix DVD rentals?

A) Subscribers who rent many DVDs per month are likely to have a more elastic demand than subscribers who rent only a few DVDs per month.
B) Subscribers who rent many DVDs per month are likely to have less elastic demand than subscribers who rent only a few DVDs per month.
C) Subscribers who rent many DVDs per month are likely view DVDs as complements to movies at the theatre and therefore making this group wait longer for new releases will have a relatively small impact on demand for Netflix DVDs.
D) Subscribers who rent many DVDs per month are likely view DVDs as substitutes to movies at the theatre and therefore making this group wait longer for new releases will have a relatively small impact on demand for Netflix DVDs.

Question 78

Figure 16-1
Refer to Figure 16-1.With perfect price discrimination,the firm will produce and sell

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

Question 79

With a monopolist engages in perfect price discrimination,the quantity produced and sold

A) is lower than the quantity produced and sold if it adopted a single price.
B) is larger than the quantity produced and sold if it adopted a single price.
C) is the same level as that produced and sold if it adopted a single price.
D) could be lower, higher or the same as that produced and sold if it adopted a single price.

Question 80

With perfect price discrimination,the marginal revenue curve

A) is below the demand curve.
B) is above the demand curve.
C) is equal to the demand curve.
D) is horizontal.