Question 1

Reference: Ref 14-3 (Figure: PPD)  Refer to the figure. A firm that perfectly price discriminates will sell:

Accepted Answer

A)   a units of output.
B)   b units of output.
C)   c units of output.
D)   d units of output.E) B) and C)
F) A) and D)

Question 2

Corresponding to the practice of price discrimination, Williams College offers different levels of financial aid to students based on students':

Accepted Answer

A)   age.
B)   family income.
C)   high school GPA.
D)   ACT/SAT scores.E) C) and D)
F) B) and D)

Question 3

Tying is uncommon.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is NOT an example of price discrimination?

Accepted Answer

A)   children's menus in restaurants
B)   peak and non-peak rates for cell phone usage
C)   product innovations leading to lower prices
D)   standby seats sold last minute by airlinesE) None of the above
F) A) and B)

Question 5

In industries with high fixed costs, price discrimination:

Accepted Answer

A)   is less common.
B)   helps firms access more markets.
C)   cannot help firms cover fixed costs.
D)   is not practiced internationally.E) A) and B)
F) All of the above

Question 6

Smuggling is an example of arbitrage.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is an example of tying?

Accepted Answer

A)   restrictions that prohibit patrons from bringing their own wine to restaurants
B)   set menus at a restaurant
C)   buy-one-get-one-free offers
D)   ―value meals‖ at fast-food restaurantsE) None of the above
F) A) and B)

Question 8

An important lesson of price discrimination is that:

Accepted Answer

A)   price discrimination will always lead to lower profits in one of the two markets.
B)   firms can increase profits by differentiating their product attributes.
C)   all firms can perfectly price discriminate.
D)   it only increases profits when the demand curves in two different markets are not the same.E) All of the above
F) B) and C)

Question 9

Which of the following statements is TRUE? I. People with common diseases live longer than people with rarer diseases. II. Developing drugs for common diseases is a lot less expensive than developing drugs for rare diseases. III. It is more profitable to make drugs for common diseases because the market is bigger than it is for rare diseases.

Accepted Answer

A)   I and II only
B)   I and III only
C)   II only
D)   III onlyE) A) and B)
F) None of the above

Question 10

Which of the following statements is TRUE? I. Perfect price discrimination maximizes consumer surplus. II. Perfect price discrimination maximizes gains from trade. III. Under perfect price discrimination, the monopolist produces until price equals marginal cost.

Accepted Answer

A)   I only
B)   I and II only
C)   II and III only
D)   I, II, and IIIE) C) and D)
F) B) and C)

Question 11

A museum in Russia has two entrances: one for locals (written in Russian)  and one for tourists (written in English) . People who enter through the entrance written in Russian will end up paying 81.93 Rubles ($3.00) . English-speaking tourists will use the entrance written in English, but they will end up paying 409.67 Rubles ($15.00) . This practice is an example of:

Accepted Answer

A)   price manipulation.
B)   price exploitation.
C)   international price mediation.
D)   price discrimination.E) A) and B)
F) A) and C)

Question 12

A top-performing used-car salesman is able to sell his cars to each customer at their maximum willingness to pay, a practice known as:

Accepted Answer

A)   insightful pricing.
B)   pricing market-to-market.
C)   perfect price discrimination.
D)   price tying.E) C) and D)
F) All of the above

Question 13

Which of the following is the main principle behind price discrimination?

Accepted Answer

A)   If the demand curves are different, it is more profitable to set different prices in different markets than a single price that covers all markets.
B)   To maximize profit the firm should set a higher price in markets with more inelastic demand.
C)   Arbitrage makes it difficult for a firm to set different prices in different markets thereby reducing the profit from price discrimination.
D)   All of the answers are correct.E) A) and D)
F) B) and D)

Question 14

A perfectly price discriminating monopolist produces until:

Accepted Answer

A)   P = MC.
B)   MR = MC.
C)   P = MR.
D)   MR = AC.E) B) and C)
F) C) and D)

Question 15

In markets with different demand curves for the same good, different prices generate less profit than a single price.

Accepted Answer

A) True 
 B)False

Question 16

Arbitrage prevention is:

Accepted Answer

A)   always easy to achieve.
B)   not necessary to practice price discrimination.
C)   easier in the case of selling services.
D)   easier in the case of selling goods.E) All of the above
F) B) and C)

Question 17

Which of the following is NOT an easy way to split markets in order to practice price discrimination?

Accepted Answer

A)   using age of customers
B)   releasing different versions of a product over time
C)   relying on the self-reported marital status of customers
D)   using characteristics that are correlated with a consumer's willingness to payE) B) and D)
F) All of the above

Question 18

To succeed at price discrimination the monopolist must prevent arbitrage.

Accepted Answer

A) True 
 B)False

Question 19

How did IBM price discriminate its laser printers?

Accepted Answer

A)   IBM provided special financing terms to different customers.
B)   IBM offered two different printers: a fast printer and a slow printer.
C)   IBM offered printers in different colors.
D)   IBM charged seniors lower prices than businesses.E) A) and B)
F) A) and C)

Question 20

Suppose that Southwestern Airlines flight 171 will depart BWI for Detroit in 3 hours. The marginal cost and average cost of flying a customer are $35 and $68, respectively. Southwestern Airlines can increase its profits by selling a ticket for no less than:

Accepted Answer

A)   $68.
B)   $103.
C)   $34.
D)   $35.E) C) and D)
F) A) and B)

Exam 14: Price Discrimination and Pricing Strategy

To succeed at price discrimination the monopolist must prevent arbitrage.

Correct Answer
verified

Tying is uncommon.

Correct Answer
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Reference: Ref 14-3 (Figure: PPD) Refer to the figure. A firm that perfectly price discriminates will sell:

Correct Answer
verified

Suppose that Southwestern Airlines flight 171 will depart BWI for Detroit in 3 hours. The marginal cost and average cost of flying a customer are $35 and $68, respectively. Southwestern Airlines can increase its profits by selling a ticket for no less than:

Correct Answer
verified

Which of the following statements is TRUE? I. Perfect price discrimination maximizes consumer surplus. II. Perfect price discrimination maximizes gains from trade. III. Under perfect price discrimination, the monopolist produces until price equals marginal cost.

Correct Answer
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How did IBM price discriminate its laser printers?

Correct Answer
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In industries with high fixed costs, price discrimination:

Correct Answer
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Which of the following is an example of tying?

Correct Answer
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An important lesson of price discrimination is that:

Correct Answer
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Smuggling is an example of arbitrage.

Correct Answer
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Which of the following is the main principle behind price discrimination?

Correct Answer
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A top-performing used-car salesman is able to sell his cars to each customer at their maximum willingness to pay, a practice known as:

Correct Answer
verified

Corresponding to the practice of price discrimination, Williams College offers different levels of financial aid to students based on students':

Correct Answer
verified

Which of the following is NOT an easy way to split markets in order to practice price discrimination?

Correct Answer
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Correct Answer
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A perfectly price discriminating monopolist produces until:

Correct Answer
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Correct Answer
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Which of the following is NOT an example of price discrimination?

Correct Answer
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In markets with different demand curves for the same good, different prices generate less profit than a single price.

Correct Answer
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Arbitrage prevention is:

Correct Answer
verified

Exam 14: Price Discrimination and Pricing Strategy

To succeed at price discrimination the monopolist must prevent arbitrage.

Correct AnswerverifiedShow Answer

Tying is uncommon.

Correct AnswerverifiedShow Answer

Reference: Ref 14-3 (Figure: PPD) Refer to the figure. A firm that perfectly price discriminates will sell:

Correct AnswerverifiedShow Answer

Suppose that Southwestern Airlines flight 171 will depart BWI for Detroit in 3 hours. The marginal cost and average cost of flying a customer are $35 and $68, respectively. Southwestern Airlines can increase its profits by selling a ticket for no less than:

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE? I. Perfect price discrimination maximizes consumer surplus. II. Perfect price discrimination maximizes gains from trade. III. Under perfect price discrimination, the monopolist produces until price equals marginal cost.

Correct AnswerverifiedShow Answer

How did IBM price discriminate its laser printers?

Correct AnswerverifiedShow Answer

In industries with high fixed costs, price discrimination:

Correct AnswerverifiedShow Answer

Which of the following is an example of tying?

Correct AnswerverifiedShow Answer

An important lesson of price discrimination is that:

Correct AnswerverifiedShow Answer

Smuggling is an example of arbitrage.

Correct AnswerverifiedShow Answer

Which of the following is the main principle behind price discrimination?

Correct AnswerverifiedShow Answer

A top-performing used-car salesman is able to sell his cars to each customer at their maximum willingness to pay, a practice known as:

Correct AnswerverifiedShow Answer

Corresponding to the practice of price discrimination, Williams College offers different levels of financial aid to students based on students':

Correct AnswerverifiedShow Answer

Which of the following is NOT an easy way to split markets in order to practice price discrimination?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A perfectly price discriminating monopolist produces until:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is NOT an example of price discrimination?

Correct AnswerverifiedShow Answer

In markets with different demand curves for the same good, different prices generate less profit than a single price.

Correct AnswerverifiedShow Answer

Arbitrage prevention is:

Correct AnswerverifiedShow Answer

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