Question 1

Successful companies:

Accepted Answer

A)  must cover allocated fixed overhead costs during off-peak periods.
B)  ignore fixed costs when the firm is operating at full capacity.
C)  differentiate markups according to variations in product demand elasticities.
D)  set prices based on standard costs per unit, irrespective of short-term variations in actual unit costs. C

Question 2

If all customers are charged the same price and the demand curve is downward sloping, consumers' surplus is always less than:

Accepted Answer

A)  total revenue minus total cost.
B)  the excess of revenues over the minimum amount necessary to produce output.
C)  total revenues.
D)  the value of output to consumers above and beyond the amount paid to producers. C

Question 3

If a firm charges a price of €9.99 for a product with a cost of €4, the markup on cost equals:

Accepted Answer

A)  40%.
B)  60%.
C)  67%.
D)  150%. D

Question 4

An 80% markup on price is equivalent to a markup on cost of:

Accepted Answer

A)  20%.
B)  44%.
C)  56%.
D)  400%.

Question 5

An 80% markup on cost is equivalent to a markup on price of:

Accepted Answer

A)  20%.
B)  44%.
C)  56%.
D)  400%.

Question 6

When P = -4, the optimal markup on cost is:

Accepted Answer

A)  25%.
B)  33%.
C)  75%.
D)  400%.

Question 7

Price discrimination always exists when:

Accepted Answer

A)  prices vary among customers.
B)  markups vary among customers.
C)  markups are constant among customers.
D)  none of these.

Question 8

A by-product is any secondary output customarily produced:

Accepted Answer

A)  in fixed proportions.
B)  in variable proportions.
C)  with MC = 0.
D)  with MC = MCQ.

Question 9

When P = -4, the optimal markup on price is:

Accepted Answer

A)  400%.
B)  75%.
C)  33%.
D)  25%.

Question 10

If a firm charges a price of €9.99 for a product with a cost of €4, the markup on price equals:

Accepted Answer

A)  40%.
B)  60%.
C)  67%.
D)  150%.

Exam 15: Pricing Practices