Question 1

According to the law of one price,identical products should sell for the same price everywhere if

Accepted Answer

B

Question 2

When Disneyland opened in 1955,what prices were charged for admission and rides?

Accepted Answer

When Disneyland first opened in 1955, all customers paid the same low price of $1 for admission and were also charged prices for each individual ride.

Question 3

Harvey Morris bought dishes and pitchers made of blue glass during the Great Depression at a flea market.He later resold these items on eBay.The profits Harvey earned from these sales are

Accepted Answer

The profits Harvey earned from reselling the blue glass items on eBay are the result of arbitrage, which is the act of buying an asset at a low price in one market and selling it at a higher price in another market. Although Harvey did not add value to the items, he was able to take advantage of the price discrepancy between the flea market and the online marketplace. The profits may be subject to taxes and may represent accounting profits, but it cannot be determined whether they are economic profits without additional information.

Question 4

According to the law of one price,

Accepted Answer

The law of one price states that identical goods should sell for the same price everywhere if transaction costs are zero. This means that in a perfect market with no barriers to trade, the price of a good should be the same across all locations.

Question 5

The price of admission to Walt Disney World

Accepted Answer

The price of admission to Walt Disney World can vary by your age and address.

Question 6

Walt Disney began planning for Disneyland in the early 1950s.When he began to consider how the amusement park would be funded

Accepted Answer

The answer of Walt Disney began planning for Disneyland in...

Question 7

Today,Walt Disney World charges different customers different prices for admission.This pricing strategy is called

Accepted Answer

Walt Disney World charges different customers different prices for admission depending on factors such as age, time of year, and number of days. This is an example of price discrimination, where a company charges different prices to different customers for the same product or service.

Question 8

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

Accepted Answer

The law of one price does not depend on transaction costs but rather assumes that goods are homogeneous and there are no barriers to trade, such as tariffs or transportation costs.

Question 9

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

Accepted Answer

Yield management involves constantly monitoring consumer demand and adjusting prices accordingly in order to maximize revenue. This process is also known as dynamic pricing and is commonly used in industries such as airlines and hotels. Elasticity management is a similar concept, but specifically refers to how much consumer demand changes based on adjustments in price. Brand management and marketing are broader concepts that involve managing and promoting a company's brand and products.

Question 10

Transactions costs refer to

Accepted Answer

Transaction costs refer to the costs that parties incur in the process of agreeing to and carrying out an exchange of goods or services, such as the cost of negotiating, finding the right buyer or seller, and ensuring that the terms of the agreement are met. It does not include the raw material cost of production or the cost of transporting goods. The implicit costs of production refer to the opportunity cost of the resources used in production, such as the cost of using capital or labor that could be used elsewhere.

Question 11

The costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services are called

Accepted Answer

Transactions costs refer to the costs involved in completing an economic transaction, which includes negotiating, communicating, and enforcing the terms of the exchange. These costs may include fees, legal expenses, transportation costs, and time spent on research and communication. The other options, exchange costs, implicit costs, and selling costs, do not specifically refer to the costs involved in completing a transaction.

Question 12

Harry attended a baseball card show in New York City where he bought a number of rookie cards of Pittsburgh Pirates baseball players from the 1950s and 1960s.Harry then sold the cards in Pittsburgh,Harry's hometown,where he knew the cards sold for higher prices.The profits Harry earned from these transactions are called

Accepted Answer

Harry engaged in arbitrage by buying undervalued cards in one market (New York City) and selling them in a higher priced market (Pittsburgh). The profits earned from arbitrage are called arbitrage profits. Choices B, C, and D are not applicable in this scenario.

Question 13

Many people sell goods through eBay at prices that are higher than the prices they paid for these goods.Economists consider these transactions as

Accepted Answer

This is an example of arbitrage, where the seller is taking advantage of price differences between different markets (in this case, buying low and selling high on eBay). It is not necessarily exploitation, as buyers are free to choose whether or not to purchase the goods at the listed price, and it is not necessarily unproductive as it can contribute to overall economic activity. It is also not a zero sum game, as the seller is earning a profit.

Question 14

In the 1950s,Walt Disney began to plan the development of a theme park that would eventually become Disneyland.Disney hired an economist to help determine whether the park would be a financial success.This economist surveyed managers of existing amusement parks for advice.Many of these managers

Accepted Answer

The answer of In the 1950s,Walt Disney began to plan...

Question 15

Many firms use technology to gather information on the preferences of consumers and their responses to changes in prices.This information is then used to adjust prices of the firms' goods and services.This practice is called

Accepted Answer

Yield management, also known as dynamic pricing, is a strategy that uses technology to gather information on the preferences of consumers and their responses to changes in prices. The gathered information is then used to adjust prices of the firm's goods and services. The goal is to maximize revenue by finding the optimal price point at which the customer demand matches the available supply.

Question 16

Which of the following will prevent firms from engaging in price discrimination?

Accepted Answer

Price discrimination involves charging different prices to different consumers for the same product or service. However, price discrimination can be prevented by arbitrage, which occurs when a third party buys a product or service from one market and sells it in another market at a higher price, thereby equalizing prices across markets. By engaging in arbitrage, consumers can take advantage of price discrimination and prevent firms from charging different prices to different consumers. Yield management, transactions costs, and odd pricing are not effective in preventing price discrimination. Yield management is a pricing strategy used by firms to maximize revenue by varying prices based on consumer demand, but it does not prevent price discrimination. Transactions costs refer to the time, effort, and money spent on making a transaction, which can increase the cost of arbitrage and reduce its effectiveness in preventing price discrimination. Odd pricing refers to setting prices at odd numbers (such as $4.99 instead of $5) to create the illusion of a lower price, but it does not prevent price discrimination.

Question 17

The law of one price

Accepted Answer

The law of one price states that identical products should sell for the same price everywhere. This means that in a perfectly competitive market, there can be no price difference for an identical product across different locations or sellers.

Question 18

Arbitrage refers to the act of

Accepted Answer

Arbitrage involves buying an asset in one market at a lower price and selling it in another market at a higher price, thus making a profit from the difference in prices. It is a common practice in financial markets such as stocks, bonds, and commodities. Options A, C, and D do not accurately describe arbitrage.

Question 19

Charging different prices to different consumers for the same product when the price differences are not due to differences in cost is called arbitrage.

Accepted Answer

The answer of Charging different prices to different consumers for...

Question 20

What is meant by the "law of one price"?

Accepted Answer

The "law of one price" states that identical products should sell for the same price everywhere. This is a key principle in economics, particularly in the study of international trade and exchange rates. It assumes that there are no barriers to trade and that there is perfect competition in the market.

Quiz 16: Pricing Strategy