Question 1

Suppose that a price-discriminating producer divides its market into two segments. If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand, the price in the market segment with more-elastic customer demand will be

Accepted Answer

Price discrimination involves charging different prices in different markets based on the consumers' willingness to pay or price elasticity of demand. The market segment with relatively less-elastic demand is willing to pay a higher price, so the producer charges $34. In contrast, the market segment with more-elastic demand is more price-sensitive and will only purchase the product at a lower price. Therefore, the price in the market segment with more-elastic demand will be less than $34.

Question 2

Refer to Table 9-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7. How many hours will be purchased and what is her total revenue?

Accepted Answer

At $7 marginal cost and $7 price, Julie's profit is $0. Therefore, the profit-maximizing quantity is where marginal cost equals price. This occurs at 4 hours, where she will earn $28 in total revenue. Any additional hours would result in a loss.

Question 3

Which of the following pricing strategies allows a firm to earn economic profit?

Accepted Answer

Price discrimination allows a firm to charge different prices to different customers based on their willingness to pay. This enables the firm to capture more of the consumer surplus and earn an economic profit. Charging a price equal to marginal cost, average total cost, or average variable cost may result in breaking even or incurring losses, but not earning profits.

Question 4

Refer to Table 9-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay. What is the value of consumer surplus by her customers?

Accepted Answer

When Julie charges each customer according to their willingness to pay, consumer surplus is eliminated because each customer pays exactly what they value the service at, leaving no surplus value.

Question 5

-Refer to Table 9-3. If Julie charges $10 per hour, how many hours of pet sitting services will be purchased and by whom?

Accepted Answer

At a charge of $10 per hour, only Cara and Dawn are willing to purchase pet sitting services, each purchasing 1 hour, as their maximum willingness to pay is at or above $10.

Question 6

Consumers who will pay high prices to be among the first to own certain new products are called

Accepted Answer

Early adopters are consumers who are willing to pay high prices to be among the first to own new products. They are considered trendsetters and are important for driving initial sales of a new product.

Question 7

Refer to Table 9-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay. What is Julie's total revenue and how many hours of service will be purchased?

Accepted Answer

The answer of Refer to Table 9-3. Suppose Julie's marginal...

Question 8

Assume that a monopolist practices perfect price discrimination. The firm will produce an output rate

Accepted Answer

Perfect price discrimination maximizes profits for the monopolist by charging each consumer their willingness to pay, resulting in no consumer surplus. This means that the monopolist will produce the efficient level of output because there is no deadweight loss.

Question 9

A perfectly competitive firm cannot practice price discrimination because

Accepted Answer

In a perfectly competitive market, the firm is a price taker, which means it has no control over the price and can only charge the market price. Since price discrimination requires the firm to charge different prices to different segments of the market, it is not possible for a perfectly competitive firm to practice price discrimination.

Question 10

Refer to Table 9-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7 per hour. What is her marginal revenue?

Accepted Answer

Marginal revenue is the additional revenue generated from selling one more unit of output. In this case, Julie charges a fixed hourly rate of $7, so her marginal revenue will also be $7 for each additional hour she provides of the service. It is not affected by the information in Table 9-3.

Question 11

Refer to Table 9-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges each customer according to his or her willingness to pay instead of a uniform price of $7. Which of the following statements is true?

Accepted Answer

By charging each customer according to their willingness to pay, Julie is able to capture the consumer surplus as economic profit. This allows her to maximize her profits and convert the consumer surplus into her own profit. Therefore, option B is the correct answer. Option A is incorrect because demand does not decrease from charging different prices for different customers. Option C is also incorrect because while some customers may have increased consumer surplus, others may have a decrease in consumer surplus. Option D is incorrect because the producer surplus is not being converted into consumer surplus, but rather into economic profit for Julie.

Question 12

The term 'early adopters' refers to

Accepted Answer

The answer of The term 'early adopters' refers to
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Question 13

Which of the following statements about perfect price discrimination is false?

Accepted Answer

This statement is false because a condition for perfect price discrimination is that it must be possible to identify and separate consumers according to their willingness to pay, not that it must be costlier to service some customers than others.

Question 14

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product. This means that

Accepted Answer

The ability to segment the market in a way that makes arbitrage impossible is the key requirement for a firm pursuing price discrimination. This means that the firm must be able to divide the market into separate groups that have different price elasticities of demand, and these groups must not be able to easily resell the product at a lower price. Option A is incorrect because setting different prices for different regions does not necessarily require market segmentation. Option B is incorrect because offering discounts to certain groups (such as senior citizens) is not the same as price discrimination. Option D is incorrect because appealing to different segments of the economy does not ensure that the market can be segmented in a way that prevents arbitrage.

Question 15

Publishers practice price discrimination when they sell books at high prices to

Accepted Answer

Price discrimination is the strategy of selling the same product to different customers at different prices based on their willingness to pay. Early adopters are typically willing to pay higher prices for the latest products, making them a target for price discrimination. Local and chain bookstores may negotiate discounts for bulk orders, but this does not necessarily involve price discrimination. Online book sellers may offer different prices based on customer data such as browsing and purchasing history, but this is not necessarily practiced by publishers.

Question 16

If a monopolist practices perfect price discrimination,

Accepted Answer

If a monopolist practices perfect price discrimination, they are able to charge each individual consumer their maximum willingness to pay, resulting in no consumer surplus. Therefore, the answer is D.

Question 17

Refer to Table 9-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7. What is the value of the consumer surplus enjoyed by her customers?

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they pay. In this case, the maximum price is $22, but they only pay $7. Therefore, the consumer surplus is $22 - $7 = $15. There are 3 customers, so the total consumer surplus is $15 x 3 = $45. However, Julie's marginal cost is $7, which means she needs to charge at least $7 to cover her costs, so her producer surplus is $7 x 3 = $21. Therefore, the total welfare (consumer surplus + producer surplus) is $45 + $21 = $66. Since only the consumer surplus is being asked for, the correct answer is $45/3 = $15, rounded down to the nearest dollar, which is $11.

Question 18

If price discrimination occurs in a market,

Accepted Answer

The answer of If price discrimination occurs in a market,
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Question 19

Refer to Table 9-3. If Julie charges $10 per hour, what is the value of the consumer surplus received by Dawn?

Accepted Answer

The answer of Refer to Table 9-3. If Julie charges...

Question 20

Assume that a monopolist practices perfect price discrimination. The firm's marginal revenue curve will

Accepted Answer

The answer of Assume that a monopolist practices perfect price...

Quiz 9: Monopoly Markets