Question 1

Perfect price discrimination is also known as

Accepted Answer

Perfect price discrimination is also known as first-degree price discrimination, where the monopolist seller charges each customer their maximum willingness to pay, resulting in capturing all the consumer surplus.

Question 2

Consider the following pricing strategies: 
a.perfect price discrimination
b.charging different prices to different groups of customers
c.optimal two-part tariff
d.single-price monopoly pricing
Which of the pricing strategies leads to the economically efficient output level?

Accepted Answer

The economically efficient output level occurs where marginal cost equals marginal revenue, which is achieved under perfect price discrimination. Optimal two-part tariffs can also lead to economically efficient output levels as they incentivize consumers to consume up to the point where marginal willingness to pay equals marginal cost. Charging different prices to different groups of customers may lead to socially optimal outcomes in certain cases, but it does not necessarily lead to economically efficient output levels. Single-price monopoly pricing tends to lead to output levels that are lower than economically efficient levels.

Question 3

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, also known as perfect price discrimination, is when a firm charges each consumer their maximum willingness to pay for a good or service. This allows the firm to capture all of the consumer surplus for themselves and maximize profits. However, it requires the firm to have perfect information about each consumer's willingness to pay and the ability to prevent arbitrage, which is the act of buying a good at a low price and reselling it at a higher price.

Question 4

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 Bubba's Hula Shack is offering a discount to customers who arrive by public transportation.

Question 5

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, where Mort's House of Flowers is able to charge different prices for the same product (one dozen roses) to different customers.

Question 6

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 arrive by public transportation are likely to be more price-sensitive as they are making a deliberate effort to save on transportation costs. Therefore, they will be more responsive to discounts and have a higher price elasticity of demand compared to customers who drive to the establishment.

Question 7

Price discrimination is the practice of

Accepted Answer

Price discrimination involves charging different prices for the same good or service, even though the cost of producing it is the same for all customers. This can be done through various methods, such as offering discounts to certain customer groups or charging higher prices for peak demand times. Option B describes price differentiation, which is based on differences in cost. Option C is not exclusive to price discrimination, as different qualities of a product can also result in different prices due to differences in production costs. Option D refers to a pricing strategy based on branding, rather than price discrimination.

Question 8

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

Accepted Answer

While yield management can be a helpful tool in implementing price discrimination strategies, it is not a requirement for success. The other options (market power, preventing resale, and knowing willingness to pay) are all essential components of a successful price discrimination strategy.

Question 9

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

An elastic demand means that consumers are more sensitive to changes in price. Therefore, if Apple charged college students and faculty members higher prices, they may choose to purchase a different brand or model of computer, resulting in lost sales for Apple. On the other hand, charging them lower prices would encourage them to purchase iMac desktop computers, generating more sales for Apple. Therefore, option B is the best choice.

Question 10

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 11

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 due to their work obligations, while leisure travelers can choose more flexible travel dates. Airlines take advantage of this by charging higher prices for those inflexible, in-demand travel days that business travelers are more likely to book. This allows the airlines to maximize profits from both business and leisure travelers.

Question 12

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

Accepted Answer

This is not an example of price discrimination because on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women. Therefore, the different prices charged to men and women are based on differences in risk and not discrimination.

Question 13

Many colleges and universities practice yield management.As a result,they offer different financial aid packages to different students.One result of yield management is that colleges often

Accepted Answer

The answer of Many colleges and universities practice yield management.As...

Question 14

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

Accepted Answer

Transactions costs being the same for all consumers is not a requirement for successful price discrimination. In fact, it is often the case that different groups of consumers will have different transaction costs. The other options listed are all requirements for successful price discrimination. A firm must be able to charge a price greater than marginal cost in order to increase profits. It must also be able to identify which consumers are willing to pay higher prices and charge them accordingly, while preventing arbitrage (the reselling of a product from a low-price market to a high-price market).

Question 15

A price-discriminating firm charges the highest price to

Accepted Answer

A price-discriminating firm charges the highest price to the group with the least elastic demand because they are willing to pay more for the good or service. The firm can charge a lower price to the group with more elastic demand because they are more sensitive to price changes and may not be willing to pay as much. The group with the largest demand or unit-elastic demand may not necessarily be charged the highest price.

Question 16

The prices college students and faculty members pay for Apple computers are lower than the prices Apple charges on its Website 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 17

Many colleges and universities practice yield management to maximize the revenue they receive from tuition and

Accepted Answer

The answer of Many colleges and universities practice yield management...

Question 18

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 19

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

Accepted Answer

In order to practice price discrimination, a firm must first be able to identify and segment the market for the product based on different factors such as geography, age, income, etc. This allows the firm to charge different prices to different groups of consumers based on their willingness to pay. Product differentiation (A) may help a firm practice price discrimination by making it easier to segment the market, but it is not necessary. The demand for the firm's product being inelastic (B) may make price discrimination easier, but it is not necessary. The firm's transaction costs being zero (D) is also not necessary for price discrimination.

Question 20

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 Fazer...

Quiz 16: Pricing Strategy

Perfect price discrimination is also known as

Consider the following pricing strategies: a.perfect price discrimination b.charging different prices to different groups of customers c.optimal two-part tariff d.single-price monopoly pricing Which of the pricing strategies leads to the economically efficient output level?

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

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

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

Price discrimination is the practice of

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

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

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

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

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

Many colleges and universities practice yield management.As a result,they offer different financial aid packages to different students.One result of yield management is that colleges often

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

A price-discriminating firm charges the highest price to

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

Many colleges and universities practice yield management to maximize the revenue they receive from tuition and

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

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