Question 1

Monopolists that are able to perfectly price discriminate will produce a level of output equal to the efficient level of output produced in a competitive market.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is NOT an example of bundling?

Accepted Answer

A)   cell phones and phone calls
B)   computer software
C)   automobiles and engines
D)   McDonald's value meals

Question 3

To price discriminate, firms must identify a customer's or a group of customers' willingness to pay.

Accepted Answer

A) True 
 B)False

Question 4

In the case of a perfectly price-discriminating monopolist, the price of the last unit sold:

Accepted Answer

A)   is greater than marginal cost.
B)   is equal to marginal cost.
C)   is less than marginal cost.
D)   and marginal cost cannot be compared.

Question 5

Compared with imperfect price discrimination, deadweight loss under a nondiscriminating monopoly is:

Accepted Answer

A)   lower.
B)   higher.
C)   the same.
D)   impossible to determine.

Question 6

Although price discrimination may increase the profits of drug companies, it reduces the incentive for drug companies to develop new drugs.

Accepted Answer

A) True 
 B)False

Question 7

Why are the prices of hardcover books more expensive than paperback?

Accepted Answer

A)   Higher production costs accounts for the entire price difference.
B)   Unlike paperback books, hardcover books are generally exempt from state sales taxes.
C)   Consumers who can't wait for the paperback version have a greater willingness to pay and buy the hardback upon its release.
D)   Hardcover books are of higher quality, and the difference in price reflects this.

Question 8

Which of the following statements is TRUE?

Accepted Answer

A)   Cable companies have a hard time knowing which customers have a high willingness to pay for specific channels and which consumers have a low willingness to pay, making bundling an effective pricing strategy.
B)   Cable companies have high marginal costs and low fixed costs of production, making bundling an ineffective pricing strategy.
C)   Cable companies have low marginal costs and high fixed costs of production, making bundling an ineffective pricing strategy.
D)   Cable companies easily know which customers have a high willingness to pay for specific channels and which consumers have a low willingness to pay, making bundling an ineffective pricing strategy.

Question 9

To succeed at price discrimination the monopolist must prevent arbitrage.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is NOT a case of bundling?

Accepted Answer

A)   Disneyland selling many attractions for a single entrance fee
B)   the buffet at China Garden
C)   cable TV offering multiple channels to its customers.
D)   HP selling printers and ink cartridges

Question 11

An example of price discrimination is charging more for steak than for a hamburger.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer questions: Table: Willingness to Pay   Maximum Willingness to Pay for Good A and Good B  John  Mary  Good A $90$35 Good B $30$70\begin{array} { l c c } \hline { 	ext { Maximum Willingness to Pay for Good A and Good B } } \\hline & 	ext { John } & 	ext { Mary } \\hline 	ext { Good A } & \$ 90 & \$ 35 \	ext { Good B } & \$ 30 & \$ 70 \\hline\end{array} Maximum Willingness to Pay for Good A and Good B  Good A  Good B ​ John $90$30​ Mary $35$70​​ 
-(Table: Willingness to Pay)  Refer to the table. If the firm were to engage in bundling, total surplus is:

Accepted Answer

A)   $65.
B)   $50.
C)   $160.
D)   $225.

Question 13

Price discriminators will set a higher price in a more elastic market.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that the government made it legal to submit false tax returns on college aid applications. What do you predict would happen to the price of attending college?

Accepted Answer

A)   Everyone would pay the price now paid by the poorest students.
B)   Wealthy students would pay less, and poor students would pay more.
C)   Wealthy students would pay more, and poor students would pay less.
D)   Everyone would pay the price now paid by the wealthiest students.

Question 15

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

Accepted Answer

A)   children's menus in restaurants
B)   peak and nonpeak rates for cell phone usage
C)   product innovations leading to lower prices
D)   standby seats sold at the last minute by airlines

Question 16

Why is it important for firms practicing price discrimination to prevent arbitrage of their product?

Accepted Answer

A)   Arbitrage is unrelated to firms' profits since the products are still being sold.
B)   Smugglers alter product quality as they pass from market to market, hence harming the reputation and future profits of firms.
C)   Arbitrage reduces the profits from price discrimination for firms, and it increases profits for smugglers.
D)   Arbitrage increases deadweight loss in the market.

Question 17

Figure: Monopolist's Profits under Price Discrimination  
Refer to the figure. Using the principles of price discrimination, explain and calculate how much profit the monopolist serving these markets could make.

Accepted Answer

If the monopolist price discriminates, i...

Question 18

Universities practice price discrimination by:

Accepted Answer

A)   charging students with the same residency status different rates of tuition.
B)   offering students different levels of scholarship support.
C)   requiring freshmen to live on campus.
D)   requiring each student take a set number of general education courses.

Question 19

Smuggling is an example of arbitrage.

Accepted Answer

A) True 
 B)False

Question 20

The Gillette Fusion razor sells for approximately $10.00, and a four-set of replacement blades sells for over $8. Which of the following statements is TRUE?
I. Consumers with a high willingness to pay for being clean-shaven will buy many replacement blades.
II. Consumers with a low willingness to pay for being clean-shaven will rarely buy replacement blades.
III. Gillette's high price for the replacement blades is a method to extract consumer surplus from those consumers with a high desire to be clean-shaven.

Accepted Answer

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

Exam 14: Price Discrimination

Correct Answer
verified

To price discriminate, firms must identify a customer's or a group of customers' willingness to pay.

Correct Answer
verified

Although price discrimination may increase the profits of drug companies, it reduces the incentive for drug companies to develop new drugs.

Correct Answer
verified

Suppose that the government made it legal to submit false tax returns on college aid applications. What do you predict would happen to the price of attending college?

Correct Answer
verified

Which of the following is NOT an example of bundling?

Correct Answer
verified

Compared with imperfect price discrimination, deadweight loss under a nondiscriminating monopoly is:

Correct Answer
verified

Smuggling is an example of arbitrage.

Correct Answer
verified

Why are the prices of hardcover books more expensive than paperback?

Correct Answer
verified

In the case of a perfectly price-discriminating monopolist, the price of the last unit sold:

Correct Answer
verified

Correct Answer
verified

Why is it important for firms practicing price discrimination to prevent arbitrage of their product?

Correct Answer
verified

Figure: Monopolist's Profits under Price Discrimination Refer to the figure. Using the principles of price discrimination, explain and calculate how much profit the monopolist serving these markets could make.

Correct Answer
verified
If the monopolist price discriminates, i...
View Answer

Which of the following statements is TRUE?

Correct Answer
verified

To succeed at price discrimination the monopolist must prevent arbitrage.

Correct Answer
verified

An example of price discrimination is charging more for steak than for a hamburger.

Correct Answer
verified

Price discriminators will set a higher price in a more elastic market.

Correct Answer
verified

Monopolists that are able to perfectly price discriminate will produce a level of output equal to the efficient level of output produced in a competitive market.

Correct Answer
verified

Which of the following is NOT a case of bundling?

Correct Answer
verified

Universities practice price discrimination by:

Correct Answer
verified

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

Correct Answer
verified

Exam 14: Price Discrimination

Correct AnswerverifiedShow Answer

To price discriminate, firms must identify a customer's or a group of customers' willingness to pay.

Correct AnswerverifiedShow Answer

Although price discrimination may increase the profits of drug companies, it reduces the incentive for drug companies to develop new drugs.

Correct AnswerverifiedShow Answer

Suppose that the government made it legal to submit false tax returns on college aid applications. What do you predict would happen to the price of attending college?

Correct AnswerverifiedShow Answer

Which of the following is NOT an example of bundling?

Correct AnswerverifiedShow Answer

Compared with imperfect price discrimination, deadweight loss under a nondiscriminating monopoly is:

Correct AnswerverifiedShow Answer

Smuggling is an example of arbitrage.

Correct AnswerverifiedShow Answer

Why are the prices of hardcover books more expensive than paperback?

Correct AnswerverifiedShow Answer

In the case of a perfectly price-discriminating monopolist, the price of the last unit sold:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why is it important for firms practicing price discrimination to prevent arbitrage of their product?

Correct AnswerverifiedShow Answer

Figure: Monopolist's Profits under Price Discrimination Refer to the figure. Using the principles of price discrimination, explain and calculate how much profit the monopolist serving these markets could make.

Correct AnswerverifiedIf the monopolist price discriminates, i...View AnswerShow Answer

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

To succeed at price discrimination the monopolist must prevent arbitrage.

Correct AnswerverifiedShow Answer

An example of price discrimination is charging more for steak than for a hamburger.

Correct AnswerverifiedShow Answer

Price discriminators will set a higher price in a more elastic market.

Correct AnswerverifiedShow Answer

Monopolists that are able to perfectly price discriminate will produce a level of output equal to the efficient level of output produced in a competitive market.

Correct AnswerverifiedShow Answer

Which of the following is NOT a case of bundling?

Correct AnswerverifiedShow Answer

Universities practice price discrimination by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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
If the monopolist price discriminates, i...
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