Question 1

A firm that practices multimarket price discrimination will set the lower price in the market that has the most elastic demand.

Accepted Answer

A) True 
 B)False

Question 2

If somebody posing as a vacationer were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

Accepted Answer

A)  group price discrimination on the part of airlines would no longer be profitable.
B)  group price discrimination on the part of airlines would no longer be profit maximizing.
C)  the airlines would respond by raising further the price charged to business flyers.
D)  this person would not earn any economic profit.E) A) and D)
F) B) and C)

Question 3

A weapons producer sells guns to two countries that are at war with each other. The guns can be produced at a constant marginal cost of $10. The demand for guns from the two countries can be represented as:
QA = 100 - 2p
QB = 80 - 4p
Why is the weapons producer able to price discriminate?
What price will it charge to each country?

Accepted Answer

The firm can price discriminate because ...

Question 4

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

Accepted Answer

A)  first-degree price discrimination.
B)  second-degree price discrimination.
C)  third-degree price discrimination.
D)  actual cost differences.E) C) and D)
F) B) and D)

Question 5

Theatres charge lower prices for a matinee and usually don't accept coupons for the night showing of movies because

Accepted Answer

A)  consumers that attend the matinee have a higher price elasticity of demand.
B)  consumers that attend the night show have a lower price elasticity of demand.
C)  it increases profits compared to charging a single price.
D)  All of the above.E) All of the above
F) A) and D)

Question 6

While price discrimination is possible between two markets, it is not possible in more than two.

Accepted Answer

A) True 
 B)False

Question 7

A specialized rice grower sells rice in two markets, the United States and Japan, and the marginal cost the same in both markets. The price elasticity of demand in the United States is -2.0, and the price elasticity of demand in Japan is -1.5. If the grower practices multimarket price discrimination, which country's consumers will pay a higher price and by how much?

Accepted Answer

(1 + 1/-2)=

(1 + 1/-1.5). Re...

Question 8

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Accepted Answer

A)  airlines would charge the same price to each type of flyer.
B)  airlines would still charge business flyers a higher fare since the traveler's employer pays anyway.
C)  airlines would be driven out of business.
D)  airlines would counter by charging vacationers a higher fare.E) None of the above
F) B) and D)

Question 9

At the current price of a good, Jessica's consumer surplus equals 12, Lauren's consumer surplus equals 14, and Isabel's consumer surplus is 4. By perfect discrimination, a monopolist could increase his profit by

Accepted Answer

A)  4.
B)  12.
C)  16.
D)  30.E) None of the above
F) C) and D)

Question 10

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. Bob is likely to price discriminate because

Accepted Answer

A)  elasticities differ across markets.
B)  the installation of carpets cannot be resold.
C)  Bob can probably identify which consumers belong to which segment.
D)  All of the above.E) B) and C)
F) A) and C)

Question 11

A perfect price discriminator

Accepted Answer

A)  charges each buyer her reservation price.
B)  charges different prices to each customer based upon different costs of delivery.
C)  generates a deadweight loss to society.
D)  charges lower prices to customers who buy greater quantities.E) None of the above
F) C) and D)

Question 12

If a market is controlled by a perfect-price-discriminating monopoly, then

Accepted Answer

A)  a deadweight loss is generated.
B)  there is no consumer surplus.
C)  consumer surplus is the same as under perfect competition.
D)  output is less than that of a single-price monopoly.E) A) and C)
F) A) and B)

Question 13

Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA = 10 - QA, and the inverse demand curve for group B is PB = 18 - QB. The monopolist is able to produce the good for either type of customer at a constant marginal cost of 2, and the monopolist has no fixed costs. If the monopolist practices group price discrimination, the profit-maximizing prices charged to each type of customer are

Accepted Answer

A)  PA = 6, and PB = 10.
B)  PA = 4 and PB = 8.
C)  PA = 10, and PB = 6.
D)  PA = 8, and PB = 4.E) B) and D)
F) A) and B)

Question 14

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

Accepted Answer

First, price discrimination allows a fir...

Question 15

A perfect price discriminator receives a price equal to marginal revenue for each unit.

Accepted Answer

A) True 
 B)False

Question 16

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

Accepted Answer

A)  Perfect price discrimination doesn't work.
B)  Transaction costs erode the profit of perfect price discrimination.
C)  Consumers are ill-informed and tend to complain too much.
D)  Uniform pricing is always more profitable and more fair as well.E) All of the above
F) A) and D)

Question 17

Advertising for Milk and Beef is usually done by

Accepted Answer

A)  interest groups that represent the whole industry.
B)  a single firm in the market.
C)  a small set of firms in a market.
D)  It is not done because it doesn't pay to advertise homogeneous products.E) All of the above
F) B) and D)

Question 18

If consumers are identical, then

Accepted Answer

A)  price discrimination is impossible.
B)  price discrimination can occur if each consumer has a downward-sloping demand curve for the product.
C)  perfect price discrimination is the only form of price discrimination that can increase a monopoly's profit.
D)  tie-in sales cannot increase a monopoly's profit.E) B) and D)
F) A) and B)

Question 19

If firms that practice second degree price discrimination use more block prices,

Accepted Answer

A)  both consumer surplus and welfare will decrease.
B)  both consumer surplus and welfare will increase.
C)  consumer surplus will decrease, but welfare will increase.
D)  consumer surplus will increase, but welfare will decrease.E) A) and B)
F) B) and C)

Question 20

Price discrimination is welfare reducing.

Accepted Answer

A)  False, price discrimination can increase the coverage of a market thereby increasing welfare.
B)  False, price discrimination limits the coverage of a market thereby increasing welfare.
C)  True, price discrimination limits the coverage of a market thereby increasing welfare.
D)  True, price discrimination can increase the coverage of a market thereby increasing welfare.E) A) and D)
F) C) and D)

Exam 12: Pricing and Advertising

At the current price of a good, Jessica's consumer surplus equals 12, Lauren's consumer surplus equals 14, and Isabel's consumer surplus is 4. By perfect discrimination, a monopolist could increase his profit by

Correct Answer
verified

A perfect price discriminator receives a price equal to marginal revenue for each unit.

Correct Answer
verified

Advertising for Milk and Beef is usually done by

Correct Answer
verified

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Correct Answer
verified

A firm that practices multimarket price discrimination will set the lower price in the market that has the most elastic demand.

Correct Answer
verified

Correct Answer
verified
The firm can price discriminate because ...
View Answer

Correct Answer
verified

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. Bob is likely to price discriminate because

Correct Answer
verified

While price discrimination is possible between two markets, it is not possible in more than two.

Correct Answer
verified

Theatres charge lower prices for a matinee and usually don't accept coupons for the night showing of movies because

Correct Answer
verified

If somebody posing as a vacationer were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

Correct Answer
verified

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

Correct Answer
verified

Price discrimination is welfare reducing.

Correct Answer
verified

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

Correct Answer
verified
First, price discrimination allows a fir...
View Answer

If firms that practice second degree price discrimination use more block prices,

Correct Answer
verified

If consumers are identical, then

Correct Answer
verified

Correct Answer
verified
(1 + 1/-2)= (1 + 1/-1.5). Re...
View Answer

A perfect price discriminator

Correct Answer
verified

If a market is controlled by a perfect-price-discriminating monopoly, then

Correct Answer
verified

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

Correct Answer
verified

Exam 12: Pricing and Advertising

At the current price of a good, Jessica's consumer surplus equals 12, Lauren's consumer surplus equals 14, and Isabel's consumer surplus is 4. By perfect discrimination, a monopolist could increase his profit by

Correct AnswerverifiedShow Answer

A perfect price discriminator receives a price equal to marginal revenue for each unit.

Correct AnswerverifiedShow Answer

Advertising for Milk and Beef is usually done by

Correct AnswerverifiedShow Answer

If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,

Correct AnswerverifiedShow Answer

A firm that practices multimarket price discrimination will set the lower price in the market that has the most elastic demand.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe firm can price discriminate because ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

-Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. Bob is likely to price discriminate because

Correct AnswerverifiedShow Answer

While price discrimination is possible between two markets, it is not possible in more than two.

Correct AnswerverifiedShow Answer

Theatres charge lower prices for a matinee and usually don't accept coupons for the night showing of movies because

Correct AnswerverifiedShow Answer

If somebody posing as a vacationer were able to purchase large numbers of airline tickets from the airlines and later resell them to business travelers,

Correct AnswerverifiedShow Answer

What is one reason car dealerships might move away from perfect price discrimination to uniform pricing?

Correct AnswerverifiedShow Answer

Price discrimination is welfare reducing.

Correct AnswerverifiedShow Answer

Explain why a firm can earn more profit by price discrimination than from setting a uniform price.

Correct AnswerverifiedFirst, price discrimination allows a fir...View AnswerShow Answer

If firms that practice second degree price discrimination use more block prices,

Correct AnswerverifiedShow Answer

If consumers are identical, then

Correct AnswerverifiedShow Answer

Correct Answerverified (1 + 1/-2)= (1 + 1/-1.5). Re...View AnswerShow Answer

A perfect price discriminator

Correct AnswerverifiedShow Answer

If a market is controlled by a perfect-price-discriminating monopoly, then

Correct AnswerverifiedShow Answer

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The firm can price discriminate because ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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First, price discrimination allows a fir...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(1 + 1/-2)= (1 + 1/-1.5). Re...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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