Deck 13: Direct Price Discrimination Indirect Price Discrimination

Question 1

Mixed bundling is

A)Where customers pay for each item separately
B)Where customers buy all item in a store at one price
C)Where customers have a choice of buying each item separately or all items at one price
D)Where customers are charged one fixed fee and a cost per unit for every unit bought

Answer 1

C

Question 2

Use the following table to answer questions 15 - 18
Assume the cost of producing the goods is zero

Suppose the monopolist only sold the goods separately.What prices will the monopolist charge for Good 2 to maximize revenues for good 1?

A)$4,500
B)$5,000
C)$1,500
D)$1,000

Answer 2

D

Question 3

Chinese restaurants that charge one price per customer for their buffet is an example of

A)Individual pricing
B)Pure bundling
C)Mixed Bundling
D)None of the above

Answer 3

A

Question 4

This __________ declared that price discrimination is illegal especially when it decreases competition.

A)Robinson-Patman Act
B)Sherman Antitrust Act of 1890.
C)Merger Act
D)Federal Trade Commission Act.

Question 5

When a firm practices perfect price discrimination,

A)The demand curve is very inelastic
B)The demand curve is the marginal revenue curve
C)The demand curve is very elastic
D)The marginal cost curve is the average cost curve

Question 6

Requirements tie-in-sale is

A)Where customers have to purchase all their products from one store in variable proportions
B)Where customer can mix and match products from different stores
C)Where two or more products are sold together in fixed proportions
D)Where you get discounts for buying in large quantities

Question 7

Economists criticize Robinson-Patman acts because

A)Economists are profit maximizers
B)Economists promote unemployment
C)Economists are against discounting of goods
D)Economists feel the act protects competitors rather than the process of competition

Question 8

Use the following table to answer questions 15 - 18
Assume the cost of producing the goods is zero

What is a better pricing strategy for the monopolist? At this price,what are the total profits to the monopolist?

A)Bundle the goods at $4,500;Profits=$9,000
B)Bundle the goods at $6,000;Profits=$12,000
C)Bundle the goods at $5,000;Profits=$10,000
D)Bundle the goods at $9,500;Profits=$19,000

Question 9

A firm practicing direct price discrimination will charge a higher price to

A)Consumers with an elastic demand
B)All consumers
C)Consumers with an inelastic demand
D)Consumers with unitary elastic demand

Question 10

The goal of price discrimination is to

A)Convert consumer surplus to producer surplus
B)Maximize profits
C)Both a and b
D)Make pricing decision difficult

Question 11

When a firm practices perfect price discrimination,

A)Consumer surplus is maximized
B)Producer surplus is minimized
C)Producer surplus is maximized
D)None of the above

Question 12

All these are motivations for tie-in-sales except,

A)Efficiency
B)Assure quality
C)Provide secret price discounts
D)All the above

Question 13

Use the following table to answer questions 15 - 18
Assume the cost of producing the goods is zero

Suppose the monopolist only sold the goods separately.What prices will the monopolist charge for Good 1 to maximize revenues for good 1?

A)$4,500
B)$5,000
C)$1,500
D)$1,000

Question 14

For direct price discrimination to work effectively

A)The low-valued group should not be able to arbitrage
B)Charge the same price to the different groups
C)Both groups should have the same elasticity of demand
D)None of the above

Question 15

Indirect price discrimination differs from direct price discrimination because

A)In direct price discrimination high value consumers can sometime enjoy the benefits of a low-values customer
B)In Direct price discrimination firms do not have to worry about cannibalizing
C)In direct price discrimination there is a risk of creating profitable entries for rival but for indirect price discrimination,this can be avoided
D)There is no difference between the two

Question 16

For a firm to maximize total profits through price discrimination,it should

A)Charge a high price to consumers with an inelastic demand and low price to consumers with an elastic demand
B)Charge a low price to consumers with an inelastic demand and high price to consumers with an elastic demand
C)Charge the same price to both sets of consumers by maximizing at MR=MC on the elastic demand
D)Charge the same price to both sets of consumers by maximizing at MR=MC on the inelastic demand

Question 17

Many bars close to campuses have started offering cheaper beer to consumers with a student ID.These bars

A)Assume students have a inelastic demand curve
B)Assume students have an elastic demand curve
C)Are practicing price discrimination
D)Both b and c

Question 18

A supermarket sells you a pound of coffee on condition that you buy a gallon of milk.This is an example of

A)Bundling
B)Package Tie in Sale
C)Price Discounts
D)Both a and b

Question 19

Use the following table to answer questions 15 - 18
Assume the cost of producing the goods is zero

What is the total profit to the monopolist from selling the goods separately?

A)$12,000
B)$13,000
C)$11,000
D)$10,000

Question 20

Assume that the price elasticity of demand for movie theatres is -.85 during all evening shows but for all afternoon shows the price elasticity of demand is -2.28.For the theatre to maximize total revenue,it should

A)Charge the same price for both shows,holding other things constant.
B)Charge a higher price for the afternoon shows and lower price for the evening shows,holding other things constant
C)Charge a lower price for the afternoon shows and higher price for the evening shows,holding other things constant
D)Need more information

Question 21

Use the following table to answer questions 23 - 26
Assume the cost of producing the goods is zero

Suppose the monopolist only sold the goods separately.What price will the monopolist charge for Good 1 to maximize revenues for good 1?

A)$2,300
B)$2,800
C)$1,200
D)$1,700

Question 22

Use the following table to answer questions 23 - 26
Assume the cost of producing the goods is zero

What is a better pricing strategy for the monopolist? At this price,what are the total profits to the monopolist?

A)Bundle the goods at $2,800;Profits=$5,600
B)Bundle the goods at $4,000;Profits=$8,000
C)Charge $2,800 for good 1 and charge $1,700 for good 2;Profits=$4,500
D)Charging the lowest price for each good individually is the best pricing strategy;profits = $7,000

Question 23

When deciding what price to charge customers,a firm may choose to charge different prices based on customers'

A)Age
B)Willingness to pay
C)Location
D)All of the above

Question 24

Use the following table to answer questions 23 - 26
Assume the cost of producing the goods is zero

What is the total profit to the monopolist from selling the goods separately?

A)$4,500
B)$6,300
C)$7,000
D)$6,200

Question 25

In theory,price discrimination

A)Reduces the number of consumers who purchase the firm's product
B)Decreases producer surplus
C)Decreases consumer surplus
D)Has no effect on deadweight loss

Question 26

Arbitrage

A)Is the act of to buying low in one market and selling high in another market
B)Can force a seller to go back to uniform pricing
C)Can defeat direct price discrimination
D)All of the above

Question 27

It is illegal for business to price discriminate when selling goods to other businesses unless

A)Price discounts are cost-justified
B)Discounts are offered to meet competitors' price
C)Both a and b
D)It is not illegal for businesses to price discriminate

Question 28

When grocery stores offer discount coupons on Sunday papers,it is trying to

A)Price discriminate
B)Undercut its competition
C)Reward the frequent readers
D)Provide a social service

Question 29

Metering is

A)A type of indirect price discrimination
B)A type of direct price discrimination
C)An evaluation of a product
D)An example of bundling

Question 30

A firm charging different customers different prices for the same product is engaged in:

A)Price discrimination
B)Price matching
C)Markup pricing
D)Predatory pricing.

Question 31

Restaurant provide discounts to seniors because

A)They have a less-price elastic demand
B)They have a more-price elastic demand
C)They are the main source of income
D)None of the above

Question 32

The practice of buying a firm's good in one market at a low price and selling it in another market for a higher price in order to profit from the price difference is known as

A)Predatory pricing
B)Price collusion
C)Arbitrage
D)Mark-up pricing

Question 33

Airlines charge a ____________ to business travelers compared to leisure travelers because business travelers have a ____________ demand than leisure travelers.

A)Higher;more elastic
B)Higher;less elastic
C)Lower;more elastic
D)Lower;less elastic

Question 34

Firms can practice indirect price discrimination by

A)Offering volume discounts
B)Using two-part pricing
C)Offering a bundle containing a number of units
D)All of the above

Question 35

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

A)Senior citizen discount at the movies
B)Grocery coupons
C)Children haircuts
D)Charging a higher price for ice-cream during the summer and a lower price in the winter

Question 36

(pg 168)Charging prices closer to what consumers are willing to pay for a good

A)Reduces consumers surplus
B)Increases producer surplus
C)Both a and b
D)None of the above

Question 37

With no price discrimination,

A)A firm sells every unit at different prices
B)A firm sells every unit at same prices
C)Low-value group pay a lower price than the high-value group
D)Low-value group pay a higher price than the high-value group

Question 38

For a firm to maximize total profits through price discrimination,it should

A)Firms should charge a low price to high-value consumers and a high price to low-value consumers
B)Firms should charge a high price to high-value consumers and a high price to low-value consumers
C)Firms should charge a low price to high-value consumers and a low price to low-value consumers
D)Firms should charge a high price to high-value consumers and a low price to low-value consumers

Question 39

Use the following table to answer questions 23 - 26
Assume the cost of producing the goods is zero

Suppose the monopolist only sold the goods separately.What price will the monopolist charge for Good 2 to maximize revenues for good 2?

A)$2,300
B)$2,800
C)$1,200
D)$1,700

Question 40

Firms choose to price discriminate

A)To earn higher profits
B)To sell goods to consumers who otherwise would not have purchased
C)Both a and b
D)None of the above