Question 1

Explain how firms practice tying and bundling, and specify the difference between the two pricing schemes.

Accepted Answer

Tying is a form of price discrimination ...

Question 2

Women tend to pay more for haircuts than men. One possible explanation is price discrimination. Another possible explanation is that:

Accepted Answer

A)   women, on average, make less money than men.
B)   women are more likely to be more demanding about their hair than men.
C)   women are less likely to be bald, which pushes up demand.
D)   women tend to take better care of their hair than men.

Question 3

Which of the following is TRUE about price discrimination in monopolistic markets?
I. Price discrimination may be good if it leads to higher output.
II. Price discrimination may help to offset high fixed costs, but it leads to less research and innovation.
III. Single pricing tends to increase prices for at least a subset of the market.

Accepted Answer

A)   I only
B)   II and III only
C)   I and III only
D)   I and II only

Question 4

Perfect price discrimination results in zero dollars of consumer surplus.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is TRUE?

Accepted Answer

A)   Arbitrage makes it easier for firms to set different prices in different markets.
B)   To maximize profits, monopolists will always set a higher price in markets with more inelastic demand curves.
C)   Monopolists typically prefer not to segment markets.
D)   Even if demand curves are identical, it is still typically profit maximizing for monopolists to charge different prices in different markets.

Question 6

Perfectly price-discriminating monopolists charge:

Accepted Answer

A)   each consumer his or her maximum willingness to pay, so consumer surplus is zero.
B)   all consumers the average of their willingness to pay, so consumer surplus is maximized.
C)   each consumer his or her maximum willingness to pay, so consumer surplus is maximized.
D)   all consumers the average of their willingness to pay, so consumer surplus is zero.

Question 7

If the demand curve for Pfizer's Norvasc, a blood pressure medication, is more elastic in Mexico than it is in the United States, how could Pfizer use this information to maximize their profits?

Accepted Answer

A)   They could segment the markets and charge a lower price for Norvasc in Mexico than in the United States.
B)   They could segment the markets and charge a higher price for Norvasc in Mexico than in the United States.
C)   Since Mexico is a poorer country than the United States, in this situation it makes more sense for Pfizer to charge only one price in both countries.
D)   They could choose to sell Norvasc only in the United States.

Question 8

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

Accepted Answer

A)   cable TV
B)   a newspaper
C)   a ticket to Disneyland
D)   a bag of chips

Question 9

Tying is a legal strategy, but bundling is illegal in the United States.

Accepted Answer

A) True 
 B)False

Question 10

Tying is uncommon.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following lists of products and services would be the most resistant to arbitrage?

Accepted Answer

A)   gasoline, movie tickets, consumer bleach
B)   dental root canals, haircuts, and cosmetic surgery
C)   third-party car stereos, full-service restaurant meals, and novels
D)   computer software, computer hardware, and tickets to sporting events

Question 12

To maximize profits, firms should always charge a higher price in the market with the more elastic demand.

Accepted Answer

A) True 
 B)False

Question 13

If output increases under price discrimination, social surplus usually:

Accepted Answer

A)   increases.
B)   decreases.
C)   remains the same.
D)   changes in an indeterminate direction.

Question 14

Which of the following statements is TRUE?

Accepted Answer

A)   Successful price discrimination requires that younger people always pay more than older people.
B)   Successful price discrimination requires that older people always pay more than younger people.
C)   Price discrimination is a common practice.
D)   Price discrimination is used by airlines and movie theaters infrequently.

Question 15

Jonathan values Word at $100 and Excel at $90, and Ashley values Word at $80 and Excel at $60. Why does bundling fail to raise the seller's profits in this case?

Accepted Answer

A)   Jonathan's and Ashley's values for Word and Excel are negatively correlated.
B)   Jonathan's and Ashley's values for Word and Excel are positively correlated.
C)   Word and Excel don't work well with each other.
D)   Word and Excel are valued highly even when bought separately.

Question 16

Economists call selling the same product at different prices to different customers:

Accepted Answer

A)   price racism.
B)   price discrimination.
C)   arbitrage.
D)   bundling.

Question 17

In general, price discrimination exists because:

Accepted Answer

A)   higher prices are required when costs are higher.
B)   lower prices are possible when profits are not a goal of the entrepreneur.
C)   higher prices are charged because some customers are willing to pay more.
D)   lower prices encourage arbitrage.

Question 18

Taking advantage of price differences for the same good by buying low in one market and selling high in another market is called:

Accepted Answer

A)   sabotage.
B)   fuselage.
C)   arbitrage.
D)   seigniorage.

Question 19

Subsidized ethanol fuel is poisoned, by government decree, to prevent arbitrage into the (drinkable) alcohol market.

Accepted Answer

A) True 
 B)False

Question 20

Bundling is a form of price discrimination that may increase economic efficiency, specifically in cases where fixed costs are high and marginal costs are low.

Accepted Answer

A) True 
 B)False

Exam 14: Price Discrimination

Which of the following statements is TRUE?

Correct Answer
verified

Perfectly price-discriminating monopolists charge:

Correct Answer
verified

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

Correct Answer
verified

Explain how firms practice tying and bundling, and specify the difference between the two pricing schemes.

Correct Answer
verified
Tying is a form of price discrimination ...
View Answer

If output increases under price discrimination, social surplus usually:

Correct Answer
verified

If the demand curve for Pfizer's Norvasc, a blood pressure medication, is more elastic in Mexico than it is in the United States, how could Pfizer use this information to maximize their profits?

Correct Answer
verified

Bundling is a form of price discrimination that may increase economic efficiency, specifically in cases where fixed costs are high and marginal costs are low.

Correct Answer
verified

Perfect price discrimination results in zero dollars of consumer surplus.

Correct Answer
verified

Subsidized ethanol fuel is poisoned, by government decree, to prevent arbitrage into the (drinkable) alcohol market.

Correct Answer
verified

Which of the following lists of products and services would be the most resistant to arbitrage?

Correct Answer
verified

Which of the following statements is TRUE?

Correct Answer
verified

Tying is a legal strategy, but bundling is illegal in the United States.

Correct Answer
verified

Taking advantage of price differences for the same good by buying low in one market and selling high in another market is called:

Correct Answer
verified

Tying is uncommon.

Correct Answer
verified

Correct Answer
verified

Economists call selling the same product at different prices to different customers:

Correct Answer
verified

Jonathan values Word at $100 and Excel at $90, and Ashley values Word at $80 and Excel at $60. Why does bundling fail to raise the seller's profits in this case?

Correct Answer
verified

In general, price discrimination exists because:

Correct Answer
verified

Women tend to pay more for haircuts than men. One possible explanation is price discrimination. Another possible explanation is that:

Correct Answer
verified

To maximize profits, firms should always charge a higher price in the market with the more elastic demand.

Correct Answer
verified

Exam 14: Price Discrimination

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

Perfectly price-discriminating monopolists charge:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explain how firms practice tying and bundling, and specify the difference between the two pricing schemes.

Correct AnswerverifiedTying is a form of price discrimination ...View AnswerShow Answer

If output increases under price discrimination, social surplus usually:

Correct AnswerverifiedShow Answer

If the demand curve for Pfizer's Norvasc, a blood pressure medication, is more elastic in Mexico than it is in the United States, how could Pfizer use this information to maximize their profits?

Correct AnswerverifiedShow Answer

Bundling is a form of price discrimination that may increase economic efficiency, specifically in cases where fixed costs are high and marginal costs are low.

Correct AnswerverifiedShow Answer

Perfect price discrimination results in zero dollars of consumer surplus.

Correct AnswerverifiedShow Answer

Subsidized ethanol fuel is poisoned, by government decree, to prevent arbitrage into the (drinkable) alcohol market.

Correct AnswerverifiedShow Answer

Which of the following lists of products and services would be the most resistant to arbitrage?

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

Tying is a legal strategy, but bundling is illegal in the United States.

Correct AnswerverifiedShow Answer

Taking advantage of price differences for the same good by buying low in one market and selling high in another market is called:

Correct AnswerverifiedShow Answer

Tying is uncommon.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economists call selling the same product at different prices to different customers:

Correct AnswerverifiedShow Answer

Jonathan values Word at $100 and Excel at $90, and Ashley values Word at $80 and Excel at $60. Why does bundling fail to raise the seller's profits in this case?

Correct AnswerverifiedShow Answer

In general, price discrimination exists because:

Correct AnswerverifiedShow Answer

Women tend to pay more for haircuts than men. One possible explanation is price discrimination. Another possible explanation is that:

Correct AnswerverifiedShow Answer

To maximize profits, firms should always charge a higher price in the market with the more elastic demand.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Tying is a form of price discrimination ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified