Question 1

Price discrimination refers to a system of pricing

Accepted Answer

Price discrimination refers to the practice of charging different prices to different customers for the same product or service. Companies do this to increase their profits by charging higher prices to customers who are willing to pay more and lower prices to those who are not. The choice D is the best answer because it describes price discrimination as charging lower prices to consumer groups with more elastic demand. Elastic demand means that consumers are more sensitive to changes in price, so companies can charge lower prices to these consumers without losing too much revenue.

Question 2

Which of the following is not a necessary condition for effective price discrimination?

Accepted Answer

Effective price discrimination can be implemented by firms with some degree of market power, not just pure monopolists. Therefore, option C is not a necessary condition. The other options, including facing a downward-sloping demand curve, having distinguishable groups of consumers, and being able to prevent resale, are all necessary conditions for effective price discrimination.

Question 3

A major fruit juice manufacturer failed in its attempt to engage in price discrimination between students and all other consumers. What is the most likely explanation for this failure?

Accepted Answer

The answer of A major fruit juice manufacturer failed in...

Question 4

Price discrimination occurs when

Accepted Answer

Price discrimination occurs when a seller charges different prices to different consumers for the same product or service. This is done in order to increase profits by capturing consumer surplus from those who are willing to pay more for the product. This can be based on factors such as income level, age, location or consumer behavior. It is illegal to discriminate based on race, gender or other protected categories.

Question 5

For effective price discrimination to occur, a seller must

Accepted Answer

Effective price discrimination requires the seller to be able to prevent consumers from reselling the product to other consumers. This is because price discrimination involves charging different prices to different groups of consumers based on their willingness to pay for the product, and if consumers can easily resell the product to each other, the seller will not be able to maintain separate markets for different price levels.

Question 6

For which of the following products would effective price discrimination (from the seller's viewpoint) be most likely?

Accepted Answer

Medical care is a product where effective price discrimination is most likely because individuals have different demand for medical services based on their age, health, and income. As a result, providers of medical care may offer different prices to different segments of the population based on their willingness and ability to pay.

Question 7

Which of the following provides the strongest evidence that a firm operating in the highly competitive retail sector is supplying goods and services that consumers value highly relative to their cost?

Accepted Answer

A firm that is highly profitable and experiencing rapid sales growth is a strong indication that consumers value their goods and services relative to their cost. This suggests that the firm has found a successful strategy for competing in the retail sector and that their offering is meeting consumer demand. High salaries for top-level managers do not necessarily indicate success, and bankruptcy would suggest that the opposite is true. The firm's size is not necessarily indicative of its success or value to consumers.

Question 8

A firm that uses price discrimination to enhance its net revenues will

Accepted Answer

The answer of A firm that uses price discrimination to...

Question 9

Even though firms in competitive price-searcher markets do not produce at minimum ATC, competitive price-searcher markets may still be consistent with economic efficiency because

Accepted Answer

Even though firms in competitive price-searcher markets do not produce at minimum ATC, these markets may still be consistent with economic efficiency because they provide consumers with a greater diversity of products. In such markets, firms have some degree of pricing power, which allows them to differentiate their products based on quality, features, or other characteristics, and attract customers who are willing to pay a premium for those differences. This can lead to more innovation, product variety, and consumer surplus than in perfectly competitive markets.

Question 10

The strategy underlying price discrimination is to

Accepted Answer

The strategy of price discrimination is to increase total revenue by charging higher prices to customers with the most inelastic demand (who are less price sensitive) and lower prices to customers with the most elastic demand (who are more price sensitive). This allows the firm to charge a higher price overall while still making sales to more price-sensitive customers. This strategy is only possible when the firm has market power and can separate customers into different groups based on their willingness to pay.

Question 11

In order for effective price discrimination to occur, a seller must

Accepted Answer

Effective price discrimination requires that the seller can identify and separate groups of consumers with different elasticities of demand, so that it can charge different prices to each group. Therefore, the seller must have at least two distinguishable groups of consumers.

Question 12

Which of the following is a necessary condition for price discrimination to be profitable?

Accepted Answer

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

Question 13

Which of the following is a necessary condition for price discrimination to be profitable?

Accepted Answer

Price discrimination relies on being able to charge different prices to different groups of consumers based on their willingness to pay. For this to be profitable, it is necessary to be able to easily identify these groups and their different demand elasticities. Option A is incorrect because if all consumers have the same demand for the product, then there would be no reason for price discrimination. Option C is incorrect because if the market demand for the product is highly elastic, then any attempt to charge different prices to different groups would likely result in consumers switching to substitute products. Option D is incorrect because if buyers can easily resell the product at a low cost, then they will likely purchase the product at the lower price and resell it to the other group, eliminating any potential profits from price discrimination.

Question 14

Which of the following provides the strongest evidence that a firm operating in the highly competitive retail sector is failing to provide goods and services that consumers value highly relative to their cost?

Accepted Answer

A decline in sales and losses indicate that consumers are not willing to pay the price that the firm is charging for its goods and services. This suggests that the firm is not providing value to consumers, indicating that the firm is failing to provide goods and services that consumers value highly relative to their cost. The other options do not provide direct evidence that the firm is not providing value to consumers.

Question 15

A practice whereby a seller charges different prices to different consumers of the same product or service is called

Accepted Answer

Price discrimination is the practice of charging different prices to different customers for the same product or service. This is often done based on factors such as location, age, or willingness to pay. It is commonly used by businesses to increase profits by charging higher prices to those who are willing to pay more and lower prices to those who are not. Oligopolistic pricing refers to a situation where a few firms in a market collude to set prices. Stay-out pricing refers to pricing strategies aimed at keeping smaller competitors out of a market. Monopolistic pricing occurs when a single firm has a monopoly on a product or service and can set prices without competition.

Question 16

Suppose that a price-discriminating firm divides its market into two segments. If the firm sells its product for a price of $42 in the market segment where demand is relatively less elastic, the price in the market segment whose customers' demand is more elastic will be

Accepted Answer

In order to maximize profits, the firm will set a higher price in the market segment whose customers' demand is less elastic, as they are less price-sensitive and willing to pay more. Therefore, the price in the market segment with more elastic demand must be lower than $42 in order to differentiate it from the other market and to capture the demand of price-sensitive customers. Choice C is the best answer as it states that the price in the more elastic market is less than $42.

Question 17

Relative to a situation where only a single price is charged, a seller that engages in price discrimination will

Accepted Answer

The answer of Relative to a situation where only a...

Question 18

Firms that engage in price discrimination

Accepted Answer

Firms that engage in price discrimination can charge different prices to different groups of customers, based on their willingness or ability to pay. This allows the firm to capture more consumer surplus and increase its profits. Therefore, firms that practice price discrimination will earn more profit than those that do not discriminate.

Question 19

Which of the following is true?

Accepted Answer

A price-discriminating seller charges different prices to different consumers based on their willingness to pay. If the consumers have an elastic demand, a higher price will cause them to decrease their demand significantly, so the seller will charge them a lower price to attract them to their product. On the other hand, consumers with an inelastic demand will not change their demand much in response to a price change, so the seller can charge a higher price to increase their revenue.

Question 20

A price-discriminating firm charges the lowest price to the group that

Accepted Answer

The price-discriminating firm would charge the lowest price to the group that has the most elastic demand, as they are the most price-sensitive and likely to switch to a different provider if prices are too high. This allows the firm to maximize revenue by charging higher prices to groups with less elastic demand who are less likely to switch providers.

Quiz 23: Price-Searcher Markets With Low Entry Barriers

Price discrimination refers to a system of pricing

Which of the following is not a necessary condition for effective price discrimination?

A major fruit juice manufacturer failed in its attempt to engage in price discrimination between students and all other consumers. What is the most likely explanation for this failure?

Price discrimination occurs when

For effective price discrimination to occur, a seller must

For which of the following products would effective price discrimination (from the seller's viewpoint) be most likely?

Which of the following provides the strongest evidence that a firm operating in the highly competitive retail sector is supplying goods and services that consumers value highly relative to their cost?

A firm that uses price discrimination to enhance its net revenues will

Even though firms in competitive price-searcher markets do not produce at minimum ATC, competitive price-searcher markets may still be consistent with economic efficiency because

The strategy underlying price discrimination is to

In order for effective price discrimination to occur, a seller must

Which of the following is a necessary condition for price discrimination to be profitable?

Which of the following is a necessary condition for price discrimination to be profitable?

Which of the following provides the strongest evidence that a firm operating in the highly competitive retail sector is failing to provide goods and services that consumers value highly relative to their cost?

A practice whereby a seller charges different prices to different consumers of the same product or service is called

Suppose that a price-discriminating firm divides its market into two segments. If the firm sells its product for a price of $42 in the market segment where demand is relatively less elastic, the price in the market segment whose customers' demand is more elastic will be

Relative to a situation where only a single price is charged, a seller that engages in price discrimination will

Firms that engage in price discrimination

Which of the following is true?

A price-discriminating firm charges the lowest price to the group that