Question 1

When firms price discriminate they

Accepted Answer

When firms price discriminate, they charge different prices for the same product to different groups of consumers based on their willingness to pay. As a result, they can get additional surplus from consumers who would have bought at the profit-maximizing uniform price but are willing to pay a higher price. In other words, price discrimination allows the firm to extract more consumer surplus than they could at a uniform price, leading to higher profits for the firm. Therefore, Choice C is the correct answer.

Question 2

Firms price discriminate to maximize total revenue.

Accepted Answer

Firms price discriminate to increases profit.

Question 3

When firms price discriminate they

Accepted Answer

When firms price discriminate, they are able to sell to new consumers that would not have bought at the profit-maximizing uniform price. This is because they are able to offer lower prices to these consumers based on their willingness to pay, which increases the overall quantity of goods sold. However, they do not necessarily lose sales to existing consumers because of the higher prices, as some existing consumers may still be willing to pay the higher price. Additionally, while they may lose some surplus from consumers who would have bought at the profit-maximizing uniform price, the overall increase in sales from serving new consumers typically outweighs this loss.

Question 4

Why do firms engage in price discrimination?

Accepted Answer

Firms engage in price discrimination to increase profits by charging different prices to different groups of consumers based on their willingness to pay. This allows the firm to capture more consumer surplus and maximize revenue. Decreasing cost or prohibiting resale may be secondary benefits of price discrimination, but increasing profits is the primary goal.

Question 5

If a firm faces a flat demand curve

Accepted Answer

A flat demand curve indicates that consumers are not very responsive to changes in price, meaning that the firm cannot increase its profits through price discrimination. Price discrimination relies on segmenting the market and charging different prices based on willingness to pay, and if all consumers have a similar willingness to pay (as indicated by a flat demand curve), then there is no room for price discrimination. Two-part tariffs and perfect price discrimination both rely on the ability to segment the market and charge different prices, so they are not possible with a flat demand curve.

Question 6

Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"?

Accepted Answer

The answer of Why might luxury-goods retailers limit purchases on...

Question 7

When firms price discriminate they turn ________ into ________.

Accepted Answer

When firms price discriminate, they charge different prices to different consumers based on their willingness to pay. This allows firms to capture more consumer surplus as profit, which is the difference between the price charged and the cost of production. Therefore, when firms price discriminate, they turn consumer surplus into profit.

Question 8

Price discrimination

Accepted Answer

Price discrimination is a type of nonuniform pricing in which a producer charges different customers different prices for the same good or service based on various factors such as location, age, and income.

Question 9

Which of the following is likely hardest to resell?

Accepted Answer

Airline tickets purchased with frequent flyer miles are often non-transferable and have restrictions that make them difficult to resell.

Question 10

At many municipal golf courses,local residents pay a lower fee to play than other golfers do.One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Accepted Answer

To successfully price discriminate according to residency, the golf course must be able to verify who is a local resident and who is not. Checking identification cards is a method to ensure that only local residents receive the lower fee, making it a necessary condition for this type of price discrimination.

Question 11

Disneyland price discriminates because

Accepted Answer

Disneyland price discriminates by offering different prices to different groups (like local residents and tourists) to maximize profits. Local residents might not visit if prices are too high, so offering them lower prices can increase overall attendance and profits, without significantly affecting the higher prices tourists are willing to pay.

Question 12

All firms can increase profits using price discrimination.

Accepted Answer

Price discrimination is not possible in competitive markets where firms are price takers and cannot influence the market price.

Question 13

Which of the following conditions must be true so that a firm can profitably price discriminate?

Accepted Answer

All three conditions must be true for a firm to profitably price discriminate. The firm must have market power, be able to identify how its consumers' demand curves differ, and be able to limit or prevent resale. Only then can it charge different prices to different groups of consumers and increase its profits.

Question 14

If resale is easy,then

Accepted Answer

When resale is easy, consumers can buy goods at the lower price and sell them to others, undermining the ability of firms to segment the market and charge different prices to different consumers. This makes price discrimination less effective because the firm cannot maintain different prices for different consumers if those consumers can simply buy the product at the lower price and resell it.

Question 15

Without price discrimination,a firm

Accepted Answer

Without price discrimination, a firm faces a tradeoff when pricing a good that has customers with different willingness to pay. This is because the firm has to choose one price that will attract all customers, regardless of their willingness to pay, which could result in losing potential revenue from higher-paying customers or losing customers altogether if the price is too high for some. Price discrimination allows the firm to charge different prices to different customers based on their willingness to pay, maximizing profit and potentially increasing consumer surplus.

Question 16

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

Accepted Answer

The answer of Charging a higher price for a motel...

Question 17

Which of the following conditions must be true so that a firm can profitably price discriminate?

Accepted Answer

For a firm to profitably price discriminate, it must be able to prevent or limit the resale of the good, ensuring that consumers who purchase at a lower price cannot resell to those who would pay a higher price.

Question 18

Price discrimination

Accepted Answer

Price discrimination is a pricing strategy where firms charge different prices to different groups of consumers for the same good or service. This allows firms to capture a larger portion of consumers' willingness to pay and increase profits. While price discrimination can sometimes be considered unethical, it is not illegal in the U.S. as long as it is not based on certain protected characteristics such as race, gender, or religion. Option A is incorrect, as price discrimination is legal in the U.S. as long as it is not discriminatory based on protected characteristics. Option C is incorrect as it refers to the strategy of setting an intermediate price between consumers' low and high willingness to pay, which is not the same as price discrimination. Option D is incorrect, as consumers do not use prices to discriminate between quality products, but rather firms use pricing strategies to charge different prices for different levels of quality.

Question 19

Which of the following conditions must be true so that a firm can profitably price discriminate?

Accepted Answer

All of the above conditions must be met for a firm to profitably price discriminate. The firm must be able to identify individual or groups of consumers with different demand curves, as well as understand how these demand curves differ. Additionally, the good must not be easily resold to prevent arbitrage opportunities.

Question 20

Resale is difficult when

Accepted Answer

Resale is difficult when transaction costs are high because it becomes costly and time-consuming to find a buyer, negotiate a price, and complete the transaction. This can reduce the potential profit from resale and make it less attractive for sellers. The other options, such as the weight or cost of the good, do not necessarily impact the ease or difficulty of resale.

Quiz 10: Pricing With Market Power

When firms price discriminate they

Firms price discriminate to maximize total revenue.

When firms price discriminate they

Why do firms engage in price discrimination?

If a firm faces a flat demand curve

Why might luxury-goods retailers limit purchases on a good by consumers "due to popular demand"?

When firms price discriminate they turn into .

Price discrimination

Which of the following is likely hardest to resell?

At many municipal golf courses,local residents pay a lower fee to play than other golfers do.One necessary condition for the golf course to be able to successfully price discriminate according to residency is that

Disneyland price discriminates because

All firms can increase profits using price discrimination.

Which of the following conditions must be true so that a firm can profitably price discriminate?

If resale is easy,then

Without price discrimination,a firm

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of

Which of the following conditions must be true so that a firm can profitably price discriminate?

Price discrimination

Which of the following conditions must be true so that a firm can profitably price discriminate?

Resale is difficult when