Deck 15: Pricing

Question 1

Being the low price seller in the market is

A)the best place to be.
B)not necessarily the best place to be.
C)expected of large firms as they are subject to economies of scale.
D)not as preferred as being the high price seller in the market.

Answer 1

not necessarily the best place to be.

Question 2

Given demand, the price is found where

A)consumer surplus is maximized.
B)average costs equal price.
C)price equals marginal revenue.
D)marginal revenue equals marginal cost.

Answer 2

marginal revenue equals marginal cost.

Question 3

The Pricing Chips suggests that consumers choose between substitutes based on

A)comparative advantages.
B)absolute prices.
C)absolute opportunity costs.
D)relative prices.

Answer 3

relative prices.

Question 4

Technology has allowing pricing to become

A)automatic.
B)personalized.
C)standardized to minimize costs.
D)regularized.

Question 5

In order to earn an economic profit, a firm needs to charge a price in excess of

A)accounting average cost.
B)normal average costs.
C)economic average cost.
D)long-run fixed costs.

Question 6

Firms try to capture consumer surplus by

A)repeat Nash equilibrium games.
B)finding markets with many competitors.
C)exploiting suppliers.
D)personalized pricing.

Question 7

Value pricing reflects

A)product differentiation.
B)competitive pricing strategies.
C)marginal cost pricing.
D)add-on price strategies.

Question 8

Pricing is made difficult by

A)firms having multiple products.
B)concerns about the response of competitors.
C)concerns about consumer linkages of price and quality.
D)all of these choices make pricing difficult.

Question 9

More and more firms use ____ to determine prices

A)market research.
B)competitive comparisons.
C)internet auctions.
D)games.

Question 10

If a firm can charge different prices for each consumer it can practice

A)second degree price discrimination.
B)perfect price discrimination.
C)third degree price discrimination.
D)consumer surplus reversal

Question 11

The area below the demand curve but above the market price line is

A)represents a Nash game outcome.
B)consumer surplus.
C)total revenue.
D)total profit.

Question 12

The high quality segment of the market may also be the same as the

A)unitary elasticity segment.
B)low elasticity segment.
C)high elasticity segment.
D)economic profit segment.

Question 13

Price should be

A)determined by equating average cost and marginal cost to determine quantity and then setting the price using that quantity and the demand curve.
B)determined by equating marginal revenue and average revenue to determine quantity and then setting the price using that quantity and the demand curve.
C)determined by equating marginal revenue and marginal cost to determine quantity and then setting the price using that quantity and the demand curve.
D)determined by equating marginal revenue and long-run average cost to determine quantity and then setting the price using that quantity and the demand curve.

Question 14

According to the book, the most important strategy to a firm is its

A)pricing strategy.
B)new product strategy.
C)cost control procedures.
D)all of these choices were reported to be equally important.

Question 15

Low quality is essentially the same as

A)low price.
B)efficient production.
C)high price.
D)low price elasticity.

Question 16

According to theory, where is the right price determined?

A)where average cost equals marginal cost.
B)where marginal revenue equals marginal cost.
C)where total revenue equals total cost.
D)where there is a markup of 300 percent.

Question 17

To practice second-degree price discrimination

A)different markets must be able to communicate with each other.
B)different markets must have the same number of customers.
C)similar markets must have similar elasticities.
D)different markets must have different elasticities.

Question 18

Commodity markets resemble

A)monopolistic markets.
B)competitive markets.
C)oligopolistic markets.
D)factor markets.

Question 19

If each customer is sold a product at a different price, then the firm is practicing

A)perfect price discrimination.
B)second-degree price discrimination.
C)third-degree price discrimination.
D)product differentiation.

Question 20

By personalizing price, firms are attempting to

A)minimize costs.
B)price discriminate.
C)standardize the pricing process.
D)none of these choices.

Question 21

In a product line extension

A)a constant price elasticity of demand is assumed.
B)a firm introduces different products and lets buyers self-select themselves into different groups.
C)is able to identify different markets at very low costs.
D)demand is assumed to be elastic

Question 22

Cell phone companies often include an activation fee with the purchase of their service.This is an example of

A)collateral pricing.
B)tying.
C)predatory pricing.
D)unfair competition.

Question 23

Grocery stores often replace

A)low profit margin goods with services.
B)low profit margin goods with high profit margin goods.
C)high profit margin goods with low profit margin goods.
D)goods with one type of elasticity with goods of similar elasticities.

Question 24

Mixed bundling may result in

A)less revenue compared to pure bundling.
B)secondary market transactions between sellers in different markets.
C)predatory pricing.
D)greater revenue compared to pure bundling.

Question 25

When a firm buys a product from another firm in the same company, it is charged

A)an implicit price.
B)a market price.
C)a predatory price.
D)a transfer price.

Question 26

If the pricing of one firm is partially influenced by what it thinks another firm will do, the two firms are

A)interdependent.
B)bundled.
C)tied.
D)independent.

Question 27

The basic difference between mixed and pure bundling is that

A)in pure bundling, buyers can only buy a collection of goods, while with mixed bundling, they can buy the collection or the components of the collection separately.
B)in pure bundling, buyers must buy a collection of goods, while in mixed bundling, buyers pay different prices for the same collection.
C)price elasticities are generally elastic when pure bundling is used while unitary elasticity is prevalent when mixed bundling is used.
D)the costs of production vary between the two types of bundling.

Question 28

If a firm is unable to distinguish different customer groups

A)it will not use product differentiation.
B)it will be unable to maximize profits.
C)it will find the quantity to product indeterminate.
D)it might use a product line extension.

Question 29

Markup pricing is the same as

A)internet pricing.
B)cost plus pricing.
C)peak-load pricing.
D)price discrimination.

Question 30

When the pricing of one product produced by a firm adversely affects the revenue earned by another product of the same firm, the second product has been

A)cannibalized.
B)tied.
C)bundled.
D)sacrificed.

Question 31

When firms price based on the packaging of several products, they are

A)using a limit price.
B)predatory in their marketing.
C)bundling.
D)none of these choices.

Question 32

The use of "anytime minutes" and "after-hour minutes" suggests that price is being influenced by

A)extensions.
B)costs.
C)time.
D)constant elasticities.

Question 33

Cost plus pricing is

A)consistent with profit maximization.
B)generally inconsistent with profit maximization.
C)the same as peak-load pricing.
D)used in product line extensions.

Question 34

When pricing is used to limit entry, it is often described as

A)effective.
B)predatory.
C)exclusive.
D)aggressive.

Question 35

$2.98 is an example of

A)typical pricing.
B)markup pricing.
C)odd pricing.
D)margin pricing.

Question 36

If price is determined as a multiple of costs, then a firm is using

A)cost plus pricing.
B)product line extension pricing.
C)peak-load pricing.
D)marginal cost pricing.

Question 37

Often the pricing of one product can adversely affect the revenue earned from another produced by the same firm.This is possible if

A)the firm can separate customers into separate markets.
B)the firm can exploit the different elasticities of different groups of consumers.
C)the firm cannot separate customers into separate markets.
D)none of these choices.

Question 38

Peak-load pricing suggests that some prices are a function of

A)extensions.
B)time.
C)costs.
D)constant elasticities.

Question 39

When a price is presented in context to another, a firm is

A)discriminating.
B)maximizing profits.
C)marking up.
D)framing.

Question 40

Pricing can be

A)in the form of a markup.
B)can be based on peak loads.
C)a barrier to entry.
D)all of these choices.

Question 41

Bundling is used to raise total revenue.

Question 42

Firms that price discriminate cannot capture consumer surplus.

Question 43

Perfect price discrimination is the same thing as predatory pricing.

Question 44

Product-line extension is a form of price discrimination.

Question 45

Peak-load pricing is often referred to as full cost pricing.

Question 46

Firms spend significant amounts of time and resources developing pricing strategies.

Question 47

Interdependence in pricing may leading to

A)predatory pricing.
B)price-fixing agreements.
C)price bundling.
D)shifts in elasticities.

Question 48

Firms want to capture consumer surplus.

Question 49

"Value pricing" stresses the importance of product differentiation.

Question 50

The price a firm charges may be related to the time of the day when its product is consumed.

Question 51

Predatory pricing is a form of barrier to entry.

Question 52

If a firm can segment its market, and the parts cannot communicate among themselves, then

A)arbitrage can occur.
B)prices in the segments will tend to be equal over time.
C)arbitrage cannot occur.
D)the different elasticities will be equal over time.

Question 53

If I worry that if I cut my price, you will cut yours, then I am acting as if we are interdependent.

Question 54

To be effective, pure bundling requires firms to be able to separate consumers into separate markets.

Question 55

Prices that firms charge should take into account the elasticity of demand.

Question 56

Transfer pricing is used by moving companies.

Question 57

To price discriminate, firms must face markets with different elasticities.