Question 1

Price discrimination exists when a firm is able to sell the same good at more than one price to different groups of
A) producers.
B) firms.
C) consumers.
D) promoters.
E) commodities.

Accepted Answer

Price discrimination occurs when a firm charges different prices to different consumers for the same good or service.

Question 2

If a firm is unable to distinguish which of its buyers has inelastic demand and which has a relatively elastic demand,then the firm will be unable to price discriminate because it will
A) not know how much of the product to offer for sale.
B) not know enough about its customer base to prevent resale.
C) not know which price to charge which customer.
D) not know how many of its customers will buy the product when it is offered for sale.
E) be unable to predict how much of its sales will be retained as profit.

Accepted Answer

Price discrimination relies on offering different prices to different customers based on their willingness to pay. Without the ability to distinguish between customers with elastic and inelastic demand, the firm will not know which customers to charge higher prices and which to charge lower prices to maximize profits.

Question 3

Which of the following statements is true?
A) Firms that can identify two types of consumers can price discriminate perfectly.
B) Firms can price discriminate only if there is zero competition in the market.
C) Firms that price discriminate will not reach higher profits.
D) Firms that can prevent reselling may be able to engage in price discrimination.
E) Firms can usually price discriminate if they are in a perfectly competitive market.

Accepted Answer

Preventing reselling is a key factor in successful price discrimination as it helps firms to segment consumers and charge different prices to different segments. The other statements are incorrect: A is not always true as firms can have more than two types of consumers; B is incorrect as firms can price discriminate in competitive markets; C is false as price discrimination can increase profits by segmenting consumers and charging higher prices to those with a higher willingness to pay; E is incorrect for the same reason as B.

Question 4

Use the following excerpt from a campus-wide announcement about a concert at the University of West Georgia (UWG)to answer the following questions:
The Band Perry [a Grammy-nominated country music act] will perform live at the University of West Georgia Coliseum on Sunday,April 22,as part of its Purveyors of Performance Tour 2012 ...Prices are $10 in advance or $15 on the day of the show for those with a UWG [Student] ID,and $20 in advance or $25 on the day of the show for the general public.
Source: "CAMPUS NEWS: The Band Perry Comes to UWG," UWG media (blog),UWG Center for Student Involvement,April 19,2012,http://uwgmedia.blogspot.com/2012/04/band-perry-comes-to-uwg_19.html.
-Why would the Center for Student Involvement complicate the ticket-pricing scheme by using four different ticket prices?
A) to see how many students will support an on-campus event
B) to keep the general public out of the rowdier student section on the concert floor
C) to separate the concert attendees into distinct groups so that they can maximize profit
D) to ensure that enough people attend the concert so that they minimize any potential loss
E) to gauge student interest in case the concert must be canceled and rescheduled to maximize profit

Accepted Answer

The Center for Student Involvement is using different ticket prices to separate the concert attendees into distinct groups (those with a UWG ID and the general public) in order to maximize profits. By charging different prices for different groups, they can ensure that they are making the most money possible from each group.

Question 5

Which of the following conditions is a requirement for price discrimination?
A) There is no reselling allowed in the market.
B) People have homogenous preferences.
C) Firms face different costs of production.
D) There are multiple firms in the market.
E) There is only one firm in the market.

Accepted Answer

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

Question 6

A price maker is a firm that
A) sets the prices that the market makes.
B) has a price that covers all of its costs.
C) sets prices that maximize consumer surplus.
D) sets prices equal to that of the market.
E) has some market power.

Accepted Answer

A price maker is a firm that has some market power, allowing it to have significant control over the price of its product. This means that the firm can set a price that is different from the market price, and can potentially earn higher profits as a result.

Question 7

Use the following excerpt from a campus-wide announcement about a concert at the University of West Georgia (UWG)to answer the following questions:
The Band Perry [a Grammy-nominated country music act] will perform live at the University of West Georgia Coliseum on Sunday,April 22,as part of its Purveyors of Performance Tour 2012 ...Prices are $10 in advance or $15 on the day of the show for those with a UWG [Student] ID,and $20 in advance or $25 on the day of the show for the general public.
Source: "CAMPUS NEWS: The Band Perry Comes to UWG," UWG media (blog),UWG Center for Student Involvement,April 19,2012,http://uwgmedia.blogspot.com/2012/04/band-perry-comes-to-uwg_19.html.
-Which price discrimination condition was satisfied by requiring students to show an ID card for an initial ticket purchase?
A) The concert promoter was able to encourage the resale of the product or service to another student.
B) The concert promoter was able to distinguish easily among groups of buyers with different price elasticities of demand.
C) The concert promoter was able to prevent the resale of the product or service to another consumer who is willing to pay more.
D) The concert promoter was able to distinguish easily among groups of sellers with different price elasticities of supply.
E) The concert promoter was able to distinguish easily between true fans of the Band Perry and those who just wanted to see a cheap concert.

Accepted Answer

Requiring students to show a UWG ID card allows the concert promoter to easily distinguish between two groups of buyers with different price elasticities of demand. Students are likely to have a higher price elasticity of demand for concert tickets than the general public, so by offering a lower price to students, the promoter can capture more revenue from this group than if they were charged the same price as the general public.

Question 8

Price discrimination exists when a firm sells ________ goods at more than one price to ________ groups of customers.
A) different; similar
B) existing; distinct
C) discounted; large
D) identical; different
E) limited; restricted

Accepted Answer

Price discrimination involves selling identical goods at different prices to different groups of customers. The key is that the goods are the same, but the price charged varies based on the characteristics of the customer or the market in which they are located. This allows firms to capture more of the consumer surplus and increase profits. Thus, option D, which refers to identical goods sold at different prices to different groups, is the best choice.

Question 9

Which of the following best describes price discrimination?
A) charging different prices to different people and the prices are perceived as unfair and harmful
B) a firm selling the same good at more than one price to different groups of customers
C) when differences in cost are reflected by differences in price
D) commission of an act that is always illegal and not beneficial to buyers or sellers
E) a practice available only to competitive,price-taking firms

Accepted Answer

Price discrimination is the practice of selling the same product at different prices to different groups of consumers. This is often done based on their willingness to pay or other factors such as age or geographic location. However, it is not necessarily perceived as unfair or harmful, as different prices may enable some consumers to access goods they might not otherwise be able to afford.

Question 10

Hotwire.com,an online travel company specializing in cheap and discounted hotel rates and airfares,often asks customers if their travel dates are flexible when pricing potential bookings.This practice helps Hotwire.com practice price discrimination by allowing it to
A) easily distinguish between different groups of buyers.
B) book reservations for customers who are most likely to travel before those who are less likely to travel.
C) post higher prices initially and then lower the price based on room availability.
D) determine which customers are simply comparison shopping and which ones are ready to make a purchase.
E) offer high prices to customers with flexible travel dates and low prices to those who are on a fixed income.

Accepted Answer

Asking customers if their travel dates are flexible helps Hotwire.com easily distinguish between different groups of buyers, such as those who are price-sensitive and can travel anytime versus those who must travel on specific dates and may be willing to pay more. This distinction allows for effective price discrimination.

Question 11

One reason that firms may be unable to utilize price discrimination as a viable strategy is because
A) it is always illegal to price discriminate.
B) firms are unwilling to maximize profits.
C) most consumers' reservation prices are well publicized.
D) firms are unable to prevent resale of the product they offer for sale.
E) firms are unlikely to increase profits after paying for increased marketing costs.

Accepted Answer

If firms are unable to prevent resale of their product, then price discrimination may not be a viable strategy since they cannot effectively control who pays what price. For example, if a firm offers a lower price to a certain group of consumers, but those consumers are able to resell the product to other consumers at a higher price, then the firm may not be able to capture the full benefits of price discrimination.

Question 12

Reese Witherspoon plans to visit her hometown of New Orleans, Louisiana. When her assistant checked the hotel reservation website, there were four published rates available, which are summarized in the following table. Use this table to answer the following questions: 
-The hotel attempts to distinguish between groups of buyers in order to
A) attract buyers who wish to practice conspicuous consumption.
B) assign prices based on the differing price elasticities of demand.
C) control the rising costs of hotel ownership.
D) appear to offer choices to the consumer.
E) deter last-minute reservations.

Accepted Answer

The different published rates suggest that the hotel is trying to assign prices based on the differing price elasticities of demand for different groups of buyers. By offering multiple rates, the hotel can attract buyers who are willing to pay more for additional benefits, such as flexibility and convenience, while also offering lower rates to price-sensitive buyers who are more likely to book if lower rates are available.

Question 13

Airlines require every passenger with a ticket to have a matching,government-issued photo identification.Price discrimination is made easier because
A) this practice prevents a passenger who purchased a discounted fare from reselling that ticket to another customer who is willing to pay more.
B) this practice allows airlines to determine the different personal characteristics of their buyers at a zero cost.
C) this type of price discrimination is mandated and supported by the federal government.
D) customers acknowledge that they are exchanging higher ticket prices for decreased safety regulations.
E) customers are then willing to divulge relevant information to the airline about their reservation price.

Accepted Answer

Requiring matching, government-issued photo identification prevents passengers from reselling their discounted tickets to others who are willing to pay more, allowing airlines to engage in price discrimination.

Question 14

For a firm to be able to practice price discrimination,it must be a
A) price maker.
B) cost producer.
C) price practitioner.
D) price taker.
E) profit maker.

Accepted Answer

Price discrimination requires a firm to have some control over the price in the market, which is indicative of being a price maker. If a firm were a price taker, it would have no control over the price and would have to accept the market price.

Question 15

Which of the following is necessary for price discrimination to occur?
A) The firm must be able to produce the good at a low cost.
B) The firm needs to decrease profits.
C) The market allows for reselling goods.
D) Consumers' preferences are hidden from the firm.
E) The firm is able to distinguish among groups of buyers easily.

Accepted Answer

Price discrimination occurs when firms are able to distinguish among different groups of buyers in terms of their willingness to pay for a good or service. This requires the ability to identify and target different segments of the market with different prices, which is facilitated when the firm can easily distinguish among these groups. Options A, B, C, and D are not necessary conditions for price discrimination to occur.

Question 16

A firm cannot price discriminate if it
A) operates in a competitive environment.
B) has a downward-sloping demand curve.
C) has a business that is regulated.
D) has perfect information about market demand.
E) can prevent resale of its product.

Accepted Answer

The answer of A firm cannot price discriminate if it
A)...

Question 17

A firm can be identified as practicing price discrimination when
A) consumers engage in comparison shopping to find the lowest advertised price.
B) firms behave as price takers,whereas consumers react with price-making behavior.
C) buyers in a perfectly competitive market are able to influence the prices that firms set.
D) producers pass on differences in costs to those price-conscious consumers willing to buy in bulk.
E) producers set different prices for distinct groups of consumers,despite selling identical products to each group.

Accepted Answer

Price discrimination occurs when a firm charges different prices for the same product to different groups of customers. This is typically done when the firm believes that different groups of customers have different levels of price sensitivity, and the firm can capture more consumer surplus by charging a higher price to those who are less price sensitive. This is different from situations where consumers engage in comparison shopping (A), where firms are price takers and consumers are price makers (B), where buyers in a perfectly competitive market influence prices (C), or where producers offer bulk discounts (D).

Question 18

Price discrimination allows firms to make more money by partitioning their customers into at least two distinct groups,those who
A) the firm wants to retain as customers and those who will decide to buy elsewhere.
B) have a similar elasticity of demand and those who are unaware of their demand elasticity.
C) will get a discount and those who are willing to pay more.
D) differ from their usual customer type and those with characteristics common to their customer base.
E) are willing to pay more and those who buy whenever they see the word 'discount.'

Accepted Answer

Price discrimination involves charging different prices to different groups of customers based on their willingness to pay. By offering a discount to customers who are sensitive to price and charging higher prices to those who are willing to pay more, the firm can capture more revenue overall. This allows the firm to increase profits without losing customers who are willing to pay the higher price.

Question 19

Reese Witherspoon plans to visit her hometown of New Orleans, Louisiana. When her assistant checked the hotel reservation website, there were four published rates available, which are summarized in the following table. Use this table to answer the following questions: 
-Why would the hotel require a guest to provide appropriate identification to receive the American Association of Retired Persons (AARP)member rate,the military rate,or the government rate?
A) to prevent resale of discounted rooms to other buyers who are not eligible for the discounted price
B) to honor those who serve in the military and offer support to the troops
C) to encourage active membership in AARP
D) to ensure that distinguished government guests are assigned the appropriate costs
E) to limit the number of patrons who receive each type of rate

Accepted Answer

The hotel would require appropriate identification to prevent resale of discounted rooms to other buyers who are not eligible for the discounted price, ensuring that only eligible guests receive the discounted rates.

Question 20

In 1996,Victoria's Secret shipped different catalogs to customers based on their buying habits.Frequent customers received catalogs with lower prices,whereas new customers received catalogs with higher prices for those same items.Victoria's Secret was practicing
A) monopolistic competition.
B) reservation pricing.
C) price retention.
D) efficient pricing.
E) price discrimination.

Accepted Answer

Victoria's Secret was engaging in price discrimination by charging different customers different prices for the same item based on their buying habits. This is a common practice in retail, where companies try to maximize their profits by charging the highest possible price to customers who are willing to pay it, and a lower price to those who are more price sensitive.

Quiz 11: Price Discrimination

Price discrimination exists when a firm is able to sell the same good at more than one price to different groups of

If a firm is unable to distinguish which of its buyers has inelastic demand and which has a relatively elastic demand,then the firm will be unable to price discriminate because it will

Which of the following statements is true?

Which of the following conditions is a requirement for price discrimination?

A price maker is a firm that

Price discrimination exists when a firm sells goods at more than one price to groups of customers.

Which of the following best describes price discrimination?

Hotwire.com,an online travel company specializing in cheap and discounted hotel rates and airfares,often asks customers if their travel dates are flexible when pricing potential bookings.This practice helps Hotwire.com practice price discrimination by allowing it to

One reason that firms may be unable to utilize price discrimination as a viable strategy is because

Airlines require every passenger with a ticket to have a matching,government-issued photo identification.Price discrimination is made easier because

For a firm to be able to practice price discrimination,it must be a

Which of the following is necessary for price discrimination to occur?

A firm cannot price discriminate if it

A firm can be identified as practicing price discrimination when

Price discrimination allows firms to make more money by partitioning their customers into at least two distinct groups,those who

In 1996,Victoria's Secret shipped different catalogs to customers based on their buying habits.Frequent customers received catalogs with lower prices,whereas new customers received catalogs with higher prices for those same items.Victoria's Secret was practicing