Question 1

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price. This practice is known as

Accepted Answer

A)   first-degree exploitation, or perfect price discrimination.
B)   maximization of producer surplus, or perfect price discrimination.
C)   first-degree price discrimination, or perfect price discrimination.
D)   first-degree transfer of consumer surplus, or perfect price discrimination.

Question 2

Assume a firm is able to use an optimal two-part tariff.
a. Is the outcome economically efficient? Why or why not?
b. What happens to consumer surplus?
c. Does this represent perfect price discrimination? Why or why not?

Accepted Answer

a. If a firm uses an optimal two-part ta...

Question 3

A firm using a two-part tariff faces a tradeoff because

Accepted Answer

A)   the only way to increase the fixed-fee portion of the price is to lower the per-unit portion of the price.
B)   the only way to increase total revenue is to lower per-unit profit.
C)   any increase in consumer surplus must be offset by a decrease in producer surplus.
D)   the smaller the variation between the parts of the price, the greater the deadweight loss generated by the pricing scheme.

Question 4

When a firm charges $4.95 instead of $5.00, what do economists call this pricing strategy?

Accepted Answer

A)   cost-plus pricing
B)   indirect pricing
C)   odd pricing
D)   unusual pricing

Question 5

Which of the following statements is true?

Accepted Answer

A)   Consumer surplus under perfect price discrimination is greater than under single-price monopoly pricing.
B)   Consumer surplus under an optimal two-part tariff is greater than that under single-price monopoly pricing.
C)   Although consumers reap some consumer surplus under a single-price monopoly, society is better off with optimal two-part tariff pricing.
D)   Of the three pricing schedules, single-price monopoly, an optimal two-part tariff and perfect price discrimination, profit is highest under single-price monopoly pricing.

Question 6

According to the law of one price,

Accepted Answer

A)   if transaction costs are zero, identical goods should sell for the same price everywhere.
B)   if transactions costs are zero, firms must sell a product at a price equal to its marginal cost.
C)   if transactions costs are zero, all firms must earn the same profit margin.
D)   there must be no differences in the cost of producing identical goods by different producers.

Question 7

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?

Accepted Answer

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

Question 8

According to the law of one price, identical products should sell for the same price everywhere if

Accepted Answer

A)   consumers have knowledge of the prices charged for products in different markets.
B)   transactions costs are zero.
C)   firms can prevent consumers from engaging in arbitrage.
D)   there are no tariffs or other restrictions on imports or exports.

Question 9

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Accepted Answer

A)   yield management.
B)   elasticity management.
C)   brand management.
D)   marketing. A

Question 10

A successful strategy of price discrimination requires that a firm be a price-taker.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

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 12

Figure 16-6  Watanabe Sensei operates the only martial arts school in Hartfield. For simplicity, assume that consumers have identical demand curves and that Sensei knows what this demand curve is. Figure 16-6 shows this demand curve.
-Refer to Figure 16-6. If Sensei acts as a monopolist, his profit-maximizing price is ________ and the number of classes sold is ________.

Accepted Answer

A)   P0; Q0
B)   P0; Q1
C)   P1; Q0
D)   P1; Q1

Question 13

Which of the following describes two-part tariff pricing?

Accepted Answer

A)   A firm charges two different prices for the same good.
B)   An importer has to pay a tax at the nation's borders, and a sales tax when the good is sold.
C)   A buyer pays an initial price for entrance to the market and an additional fee for each unit of the product purchased.
D)   A buyer must pay a down payment and monthly payments to buy big-ticket items such as a car, a plasma television or a suite of furniture.

Question 14

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

Accepted Answer

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

Question 15

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following will prevent firms from engaging in price discrimination?

Accepted Answer

A)   yield management
B)   arbitrage
C)   transactions costs
D)   odd pricing B

Question 17

Which of the following is not an advantage of cost-plus pricing?

Accepted Answer

A)   It is easy to calculate.
B)   It requires little information.
C)   If a firm is selling multiple products, it ensures that the firm's prices will cover costs that are difficult to assign to one product.
D)   It ensures that the firm will maximize its profits.

Question 18

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

Accepted Answer

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

Question 19

The following table contains the actual prices charged by four Websites for the PlayStation 3 game The Last of Us in October 2013.
  Explain whether the information in this table contradicts the law of one price.

Accepted Answer

The data in the table does seem to contradict the law of one price, since the price of this game at Wal-Mart and is considerably less than the price at Best Buy, GameStop, and Target.

Question 20

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Accepted Answer

A) True 
 B)False

Exam 16: Pricing Strategy

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price. This practice is known as

Correct Answer
verified

Assume a firm is able to use an optimal two-part tariff. a. Is the outcome economically efficient? Why or why not? b. What happens to consumer surplus? c. Does this represent perfect price discrimination? Why or why not?

Correct Answer
verified
a. If a firm uses an optimal two-part ta...
View Answer

A firm using a two-part tariff faces a tradeoff because

Correct Answer
verified

When a firm charges $4.95 instead of $5.00, what do economists call this pricing strategy?

Correct Answer
verified

Which of the following statements is true?

Correct Answer
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According to the law of one price,

Correct Answer
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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?

Correct Answer
verified

According to the law of one price, identical products should sell for the same price everywhere if

Correct Answer
verified

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Correct Answer
verified
A

A successful strategy of price discrimination requires that a firm be a price-taker.

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

Correct Answer
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Correct Answer
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Which of the following describes two-part tariff pricing?

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

Correct Answer
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The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

Correct Answer
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Which of the following will prevent firms from engaging in price discrimination?

Correct Answer
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B

Which of the following is not an advantage of cost-plus pricing?

Correct Answer
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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

Correct Answer
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The following table contains the actual prices charged by four Websites for the PlayStation 3 game The Last of Us in October 2013. Explain whether the information in this table contradicts the law of one price.

Correct Answer
verified
The data in the table does seem to contradict the law of one price, since the price of this game at Wal-Mart and is considerably less than the price at Best Buy, GameStop, and Target.

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Correct Answer
verified

Exam 16: Pricing Strategy

If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price. This practice is known as

Correct AnswerverifiedShow Answer

Assume a firm is able to use an optimal two-part tariff. a. Is the outcome economically efficient? Why or why not? b. What happens to consumer surplus? c. Does this represent perfect price discrimination? Why or why not?

Correct Answerverifieda. If a firm uses an optimal two-part ta...View AnswerShow Answer

A firm using a two-part tariff faces a tradeoff because

Correct AnswerverifiedShow Answer

When a firm charges $4.95 instead of $5.00, what do economists call this pricing strategy?

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

According to the law of one price,

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

According to the law of one price, identical products should sell for the same price everywhere if

Correct AnswerverifiedShow Answer

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Correct AnswerverifiedA

A successful strategy of price discrimination requires that a firm be a price-taker.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following describes two-part tariff pricing?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

Correct AnswerverifiedShow Answer

Which of the following will prevent firms from engaging in price discrimination?

Correct AnswerverifiedB

Which of the following is not an advantage of cost-plus pricing?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The following table contains the actual prices charged by four Websites for the PlayStation 3 game The Last of Us in October 2013. Explain whether the information in this table contradicts the law of one price.

Correct AnswerverifiedThe data in the table does seem to contradict the law of one price, since the price of this game at Wal-Mart and is considerably less than the price at Best Buy, GameStop, and Target.

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Correct AnswerverifiedShow Answer

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a. If a firm uses an optimal two-part ta...
View Answer

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A

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B

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The data in the table does seem to contradict the law of one price, since the price of this game at Wal-Mart and is considerably less than the price at Best Buy, GameStop, and Target.

Correct Answer
verified