Question 1

Price discrimination is the practice of

Accepted Answer

Price discrimination refers to the practice of charging different prices for the same good or service, where the price differences are not due to differences in cost. This is often done by companies to maximize their profits by charging different prices to different customers based on their willingness to pay. Examples include student discounts, senior citizen discounts, and dynamic pricing used by airlines, hotels, and ride-sharing companies.

Question 2

Bubba's Hula Shack bar and bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill.This is an example of

Accepted Answer

This is an example of price discrimination, as customers who arrive by public transportation receive a discount that is not available to others. By offering a lower price to a specific group of customers, the establishment is engaging in price discrimination.

Question 3

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

Accepted Answer

The answer of Which of the following is not an...

Question 4

Arnold Marion, a first-year economics student at Fazer College, was given an assignment to find an example of price discrimination and present it to his class.When asked for his example Arnold said "I went to a Milwaukee Brewers baseball game with my cousin last week.We paid $25 each for our seats in left field.My aunt and uncle paid $50 each for their tickets; they sat five rows behind the first base dugout.This is an example of price discrimination since we paid different prices for the same product, and the differences were not due to differences in costs." How would Arnold's economics instructor assess Arnold's example?

Accepted Answer

The answer of Arnold Marion, a first-year economics student at...

Question 5

Price discrimination is a rational strategy for a profit-maximizing firm when

Accepted Answer

The answer of Price discrimination is a rational strategy for...

Question 6

College students and faculty members have a more elastic demand than the general public for Apple's iMac desktop computers.From this we can conclude that

Accepted Answer

Since college students and faculty members have a more elastic demand for iMac desktop computers, Apple will have to lower its prices to attract them. This is because if Apple charges higher prices to this group, they are more likely to switch to other brands or alternatives. Thus, Apple will offer lower prices to college students and faculty members than the general public.

Question 7

Which of the following is not a requirement for a successful price discrimination strategy?

Accepted Answer

If transaction costs are different for different consumers, then a successful price discrimination strategy can still be implemented. In fact, some forms of price discrimination, such as volume discounts, rely on differences in transaction costs among consumers.

Question 8

Bubba's Hula Shack bar and bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill.All else equal, customers who arrive by public transportation to take advantage of Bubba's Hula Shack discount have a ________ for the services of the establishment than customers who drive to the establishment.

Accepted Answer

Customers who choose to take public transportation to Bubba's Hula Shack are likely more price-sensitive and cost-conscious, which would make them more responsive to discounts and incentives. They may be less likely to visit the establishment if prices were higher, and more likely to choose an alternative dining option. Therefore, their demand for the services of the establishment is likely more elastic than customers who drive there.

Question 9

Insurance companies typically charge women lower prices than men for automobile insurance.Is this an example of price discrimination?

Accepted Answer

Insurance companies charge lower prices to women not because of their gender, but because, on average, women have better driving records than men, and therefore, the costs of insuring women are lower. This is not an example of price discrimination since it is not based on arbitrary characteristics but rather on statistically significant differences in driving behaviors between men and women.

Question 10

If a firm knew every consumer's willingness to pay and could prevent arbitrage it could charge every consumer a different price.This practice is known as

Accepted Answer

First-degree price discrimination, or perfect price discrimination, involves a firm charging every consumer a different price based on their individual willingness to pay. This practice maximizes the firm's profits by capturing all consumer surplus and eliminating deadweight loss. However, it requires that the firm has perfect information about every consumer's willingness to pay and can prevent arbitrage, which is not feasible in most markets.

Question 11

Which of the following is a reason why a firm would not engage in price discrimination?

Accepted Answer

The answer of Which of the following is a reason...

Question 12

Consumers who ________ will be more likely to buy goods in outlet malls at a lower price, while consumers who ________ will be more willing to pay full price in regular stores.

Accepted Answer

Consumers who are more price-sensitive are more likely to look for lower prices and therefore buy goods in outlet malls. Consumers who are less price-sensitive are not as concerned with the price and are more willing to pay full price in regular stores.

Question 13

A price-discriminating firm charges the highest price to

Accepted Answer

Price discrimination involves charging different groups of consumers different prices. In order to maximize profits, the firm will charge higher prices to the group with the least elastic demand because they are willing to pay more for the good or service. The group with the most elastic demand will be charged a lower price, as it is more price sensitive and may not be willing to pay a higher price. Therefore, option B is incorrect. The group with the largest demand may also be charged a lower price, but this is not always the case as they may still be sensitive to price changes. Option A is therefore incorrect. Option D is also incorrect because a group with demand that is unit elastic will have the same responsiveness to price changes as the average consumer, and may not necessarily warrant a higher or lower price.

Question 14

One reason why airlines charge business travelers and leisure travelers different prices is

Accepted Answer

Business travelers often have inflexible schedules and have to travel on a particular day. The opposite is true for leisure travelers. This means that airlines can charge higher prices to business travelers who have a higher willingness to pay due to their travel constraints. Leisure travelers, on the other hand, have more flexibility in their travel dates and can choose to fly on days with lower prices, leading to airlines charging them lower prices.

Question 15

The prices college students and faculty members pay for Apple computers are lower than the prices Apple charges on its Web site and in retail stores.Apple charges lower prices to college students and faculty members because

Accepted Answer

The answer of The prices college students and faculty members...

Question 16

Which of the following is necessary in order for a firm to successfully practice price discrimination?

Accepted Answer

In order for a firm to successfully practice price discrimination, it must be able to segment the market for the product. This means that the firm must be able to identify distinct groups of customers with different willingness to pay for the product. Without market segmentation, the firm would not be able to charge different prices to different customers. While product differentiation and inelastic demand can make price discrimination more effective, they are not necessary conditions. Zero transaction costs would also make price discrimination easier, but this is not a necessary condition.

Question 17

Which of the following is not a requirement for a successful price discrimination strategy?

Accepted Answer

Yield management is a technique used to optimize revenue by varying the price and availability of a product depending on the time, demand, and other relevant factors. However, it is not a requirement for price discrimination. The other options are all essential for a successful price discrimination strategy.

Question 18

If Mort's House of Flowers sells one dozen roses to different customers at different prices, economists would consider this an example of

Accepted Answer

This is an example of price discrimination, as Mort's House of Flowers is selling the same product (one dozen roses) to different customers at different prices. This is usually done to increase profits by charging customers with a higher willingness to pay a higher price, while still making sales to customers with a lower willingness to pay at a lower price.

Question 19

In which market structure is it not possible to practice price discrimination?

Accepted Answer

In perfect competition, all firms sell the same product at the same price, so there is no opportunity for any firm to practice price discrimination.

Question 20

Perfect price discrimination is also known as

Accepted Answer

Perfect price discrimination is also known as first-degree price discrimination, where a firm charges each customer the maximum price they are willing to pay for a product or service. The firm is able to capture all of the consumer surplus and maximize profits.

Quiz 16: Pricing Strategy

Price discrimination is the practice of

Bubba's Hula Shack bar and bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill.This is an example of

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

Price discrimination is a rational strategy for a profit-maximizing firm when

College students and faculty members have a more elastic demand than the general public for Apple's iMac desktop computers.From this we can conclude that

Which of the following is not a requirement for a successful price discrimination strategy?

Insurance companies typically charge women lower prices than men for automobile insurance.Is this an example of price discrimination?

If a firm knew every consumer's willingness to pay and could prevent arbitrage it could charge every consumer a different price.This practice is known as

Which of the following is a reason why a firm would not engage in price discrimination?

Consumers who will be more likely to buy goods in outlet malls at a lower price, while consumers who will be more willing to pay full price in regular stores.

A price-discriminating firm charges the highest price to

One reason why airlines charge business travelers and leisure travelers different prices is

The prices college students and faculty members pay for Apple computers are lower than the prices Apple charges on its Web site and in retail stores.Apple charges lower prices to college students and faculty members because

Which of the following is necessary in order for a firm to successfully practice price discrimination?

Which of the following is not a requirement for a successful price discrimination strategy?

If Mort's House of Flowers sells one dozen roses to different customers at different prices, economists would consider this an example of

In which market structure is it not possible to practice price discrimination?

Perfect price discrimination is also known as