Question 1

Perfect price discrimination creates:

Accepted Answer

The answer of Perfect price discrimination creates:
...

Question 2

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

If false tax returns were allowed, wealthy students could manipulate their income to appear poorer on their college aid applications and receive more financial aid. This would result in the amount of aid available to the truly poor students being spread more thinly, causing them to pay more. Conversely, wealthy students would pay less as a result of receiving more aid.

Question 3

Use the following to answer questions: Figure: PPD 
-(Figure: PPD) Refer to the figure. Which of the following statements best explains why a firm that perfectly price discriminates would sell additional units beyond c units of output?

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 4

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

I is not true because perfect price discrimination results in each consumer paying their willingness to pay, which eliminates any consumer surplus. 
II is true because perfect price discrimination results in the monopolist capturing all of the consumer surplus as profit, maximizing the gains from trade. 
III is true because under perfect price discrimination, the monopolist will sell each unit at the consumer's willingness to pay, which is equivalent to marginal revenue, therefore they will produce until price equals marginal cost to maximize their profit.

Question 5

Which of the following statements is TRUE?

Accepted Answer

Customers who purchase airline tickets weeks or months in advance are typically planning a vacation and therefore have more flexibility in their travel plans. They can choose to travel on different dates or opt for different airlines depending on price. This makes them more sensitive to ticket prices and more likely to search for the best deal. Business travelers, on the other hand, often have tighter schedules and less flexibility, making them less sensitive to ticket prices and less likely to shop around.

Question 6

The textbook for your economics class is available in an American version and in a much cheaper Indian version that has the same text but no colors for the graphs (the difference in prices is much higher than the difference in costs). Why is this the case?

Accepted Answer

The answer of The textbook for your economics class is...

Question 7

Merit scholarships not only allow universities to attract the most talented students, but to also practice price discrimination since meritorious students:

Accepted Answer

The answer of Merit scholarships not only allow universities to...

Question 8

Under perfect price discrimination:

Accepted Answer

In perfect price discrimination, each customer is charged his or her maximum willingness to pay. This allows the seller to extract all possible consumer surplus and leads to the highest possible profits for the seller.

Question 9

If students in the United States go online and import the much cheaper Indian version of your textbook instead of buying the American edition, how might this arbitrage nevertheless help the publisher of your textbook?

Accepted Answer

If students are willing to go through the trouble of importing a cheaper version of the textbook, it suggests that their willingness-to-pay for the American edition was relatively low. By allowing them to purchase a cheaper version, the publisher is able to extract some additional profit from students who might not have otherwise bought the book at all. This creates another layer of price discrimination, where students with different willingness-to-pay are charged different prices for essentially the same product.

Question 10

Which of the following statements is TRUE?

Accepted Answer

Price discrimination is a common practice and is used in various industries such as airlines, movie theaters, and even in online retail. However, there is no requirement for younger or older people to always pay more or less in successful price discrimination. The pricing strategy depends on various factors such as demand, consumer behavior, and market competition. Statement A and B are both false. Statement D is also false as airlines and movie theaters are some of the most commonly cited examples of businesses that use price discrimination.

Question 11

Airlines price discriminate prominently by charging _______ more than _________.

Accepted Answer

Airlines practice price discrimination by charging more to business travelers who are usually on tight schedules and can afford to pay more for convenience, in contrast to vacationers who are more flexible and may choose cheaper options.

Question 12

Figure: PPD Monopolist  Refer to the figure. A monopolist who cannot price discriminate earns profit equal to area(s) ________, and a monopolist practicing perfect price discrimination earns profit equal to areas ________.

Accepted Answer

The shaded area in the figure represents the profit earned by the monopolist. 
For the monopolist who cannot price discriminate, profit equals the rectangle marked 'b'. 
For the monopolist practicing perfect price discrimination, profit equals the entire triangle marked 'abc'. Therefore, the correct answer is C, where the monopolist who cannot price discriminate earns profit equal to area 'b', and the monopolist practicing perfect price discrimination earns profit equal to areas 'abc'.

Question 13

Movie theaters typically price discriminate by charging ______ a lower price than ______.

Accepted Answer

Movie theaters typically offer lower ticket prices for senior citizens, who are likely to have a lower income and may have more free time during the day to attend movies. Young adults are generally charged a higher price as they are seen as having more disposable income and are more likely to attend movies on evenings and weekends. Gender-based pricing discrimination is not a common practice in the movie theater industry.

Question 14

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

Perfect price discrimination occurs when a seller is able to charge each customer their maximum willingness to pay, resulting in maximum profit for the seller. This is the practice described in the scenario of the top-performing used-car salesman.

Question 15

Williams College used ________ as a means to ________.

Accepted Answer

Williams College used student financial aid as a means to price discriminate. By offering financial aid to students based on their financial need, the college is able to charge higher tuition prices to affluent students while still ensuring that they can attract and enroll students from lower-income households. This allows the college to effectively price discriminate and maximize revenue.

Question 16

Use the following to answer questions: Figure: PPD 
-(Figure: PPD) Refer to the figure. A firm that perfectly price discriminates will sell:

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 17

Why are seniors charged less for coffee at McDonald's than younger people?

Accepted Answer

The answer of Why are seniors charged less for coffee...

Question 18

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

Accepted Answer

Hardcover books are typically released before paperback and therefore target a different market. Consumers who cannot wait for the paperback version are willing to pay more for the hardback, and publishers capitalize on this by charging more for the hardcover edition. The higher production costs for hardcover books may also play a role in the price difference, but it is not the sole factor. The quality argument (D) can also be debated as subjective, as some readers actually prefer the tactile experience of reading a paperback. State sales tax (B) may vary by location, but it is not a significant enough factor to account for the price difference between hardcover and paperback books.

Question 19

Use the following to answer questions: Figure: PPD 
-(Figure: PPD) Refer to the figure. Which of the following statements best explains why a firm that perfectly price discriminates would sell additional units beyond a units of output?

Accepted Answer

Since a firm that perfectly price discriminates charges each individual their willingness to pay for each unit, they can continue to sell additional units beyond a as long as the marginal cost is less than consumers' willingness to pay for those units. This means that the firm can continue to make a profit by selling additional units beyond the profit-maximizing rate of output.

Question 20

Imagine a technology that enabled people to sell part of the contents of their brains directly (assume that the seller does not get to keep a copy of the contents). Why might this make price discrimination for college education more difficult?

Accepted Answer

If people were able to sell part of the contents of their brains, it would allow for information to be spread more easily and at a lower cost. This means that even poor students would have access to the same information as wealthy students, reducing the effects of price discrimination for college education. Furthermore, poor students could attend college at a low cost by repeatedly selling information to wealthy students, making education more accessible to all socio-economic classes.

Quiz 14: Price Discrimination

Perfect price discrimination creates:

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?

Use the following to answer questions: Figure: PPD -(Figure: PPD) Refer to the figure. Which of the following statements best explains why a firm that perfectly price discriminates would sell additional units beyond c units of output?

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.

Which of the following statements is TRUE?

The textbook for your economics class is available in an American version and in a much cheaper Indian version that has the same text but no colors for the graphs (the difference in prices is much higher than the difference in costs) . Why is this the case?

Merit scholarships not only allow universities to attract the most talented students, but to also practice price discrimination since meritorious students:

Under perfect price discrimination:

If students in the United States go online and import the much cheaper Indian version of your textbook instead of buying the American edition, how might this arbitrage nevertheless help the publisher of your textbook?

Which of the following statements is TRUE?

Airlines price discriminate prominently by charging _ more than ___.

Figure: PPD Monopolist Refer to the figure. A monopolist who cannot price discriminate earns profit equal to area(s) , and a monopolist practicing perfect price discrimination earns profit equal to areas .

Movie theaters typically price discriminate by charging a lower price than .

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:

Williams College used as a means to .

Use the following to answer questions: Figure: PPD -(Figure: PPD) Refer to the figure. A firm that perfectly price discriminates will sell:

Why are seniors charged less for coffee at McDonald's than younger people?

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

Use the following to answer questions: Figure: PPD -(Figure: PPD) Refer to the figure. Which of the following statements best explains why a firm that perfectly price discriminates would sell additional units beyond a units of output?

Imagine a technology that enabled people to sell part of the contents of their brains directly (assume that the seller does not get to keep a copy of the contents) . Why might this make price discrimination for college education more difficult?