Econ 2106: Inquisitive Ch 11: Price Discrimination

If the helicopter company charges three prices: Youth (16 or below), Adult, and Senior (55+), what is their maximum possible net profit? The marginal cost of taking on additional passengers is a constant $10.

$230

Prevent resale

-A software firm sells software that can only be installed on three computers.

Which of the following are examples of price discrimination?

A computer producer offers a mail-in rebate after purchase.

Which of the following is not a reason for the firm in question to price-discriminate?

A fast-food chain cannot distinguish between consumers who really like its food from those who think its merely fine

Which of the following firms would be able to price discriminate most successfully?

An amusement park that is the only one in the state.

Inelastic

Avoiding the Black Friday sales the day after Thanksgiving Attending an out-of-state public university

Firms are able to price-discriminate when resale is impossible and groups of individuals are difficult to distinguish.

False

Which of the following is an effect of implementing price discrimination?

Quantity sold increases

Which of the following are ways in which firms price-discriminate?

Sales on holiday weekends Senior citizen discounts

Which of the following occurs if a monopolist firm changes from uniform pricing to perfect price discrimination?

The prior consumer surplus is transferred to the producer. The producer's revenue increases.

A market is more efficient, and society is better off, whenever a price-making firm is able to price-discriminate, even when consumer surplus is converted to producer surplus.

True

Both private and public universities are able to price-discriminate among entering students.

True

Students who are accepted through early decision to a college or university, which represents a binding agreement to attend that college, are less likely to receive financial aid.

True (Students who apply early decision to a college or university have more inelastic demand for that school. They will pay the tuition even if they do not get any type of financial aid.)

Order the following businesses based on the likelihood that the firm will be able to attain near perfect price discrimination. Order the options from least likely to most likely.

Vendor selling almonds at a farmer's market Movie theater that charges two different prices based on showtime Automobile dealership that negotiates a unique price for each customer

Because each country represents a distinct market, pharmaceutical firms can distinguish groups of buyers based on the consumer's -. If the United States did not ban drug reimportation, drug manufacturers would not be able to - resale of drugs. Because the United States is a high-income country and reimportation is banned, pharmaceutical companies can charge a - price to U.S. consumers.

location prevent higher

Order the following businesses based on the likelihood that the firm will be able to attain near perfect price discrimination. Order the options from least likely to most likely.

vendor selling almonds at a farmer's market movie theater that charges two different prices based on show time automobile dealership that negotiates a unique price for each customer

If the helicopter company charges three prices: Youth (16 or below), Adult, and Senior (55+), what is their maximum possible net revenue? The marginal cost of taking on additional passengers is a constant $10.

$230

Distinguish group of buyers

-A movie theater can ask for proof of a consumer's age. -A headphone maker issues a rebate to those who mail in a form.

Compared to a single-price monopoly, a firm that operates in a perfectly competitive market is similar to a monopoly firm that is able to perfectly price discriminate in which of the following ways?

-Deadweight loss is eliminated. -Quantity sold would be the same. -Total surplus is maximized.

Inelastic (behaviors examples)

-attending an out-of-state public university -avoiding the Black Friday sales the day after Thanksgiving

Elastic (behaviors examples)

-taking kids to a restaurant that offers discounts for children under a certain age -buying in bulk to get a low price -seeing a movie showing at 1:30 in the afternoon

The graph on the left shows a market in which a monopolist airline does not price-discriminate and charges $300 per ticket. This generates a net revenue of $20,000. The graph on the right shows a market in which the monopolist price-discriminates and charges $200 to customers who buy their tickets at least two weeks in advance, and $400 to customers who do not. This generates a net revenue of $25,000. How much net revenue would this airline generate if it were able to practice perfect price discrimination?

40,000

single price monopoly

A is consumer surplus, B is producer surplus, and C is deadweight loss. Correct label: single price monopoly

Distinguish group of buyers

A movie theater can ask for proof of a consumer's age. A headphone maker issues a rebate to those who mail in a form.

When firms price-discriminate, they charge different groups of consumers different prices based on the consumers' varying willingness to pay for a good or service. Which of the following are instances of price discrimination?

A night club has a Ladies' Night for which women do not pay a cover charge while men do. Firms offer clip-out coupons that provide a discount to customers who present them in the store.

Prevent resale

A software firm sells software that can only be installed on three computers.

The owners of a movie theater are deciding which price to charge for each movie. The marginal cost is $4 per customer, and the possible prices and quantity of customers are shown in the graph below.

If the owners charge a higher price of $16 for each movie, then they will have a total profit of $1,200. If the owners charge a lower price of $12 for each movie, then they will have a total profit of $1,600. If the owners choose to charge only a single price, then they should charge the lower price; however, if the owners are able to price discriminate and charge both $12 and $16, then they will earn a profit of $2,000.

Select the options that illustrate the ways in which firms get consumers to reveal their demand elasticity.

Making people show a coupon in order to receive a discount Limiting outside food and drink at the movie theater. Locating discount outlets far from major population centers

Under price discrimination, - decreases because the number of consumers able to purchase the good or service increases. This always has the effect of increasing -. Depending on the nature of the price discrimination, - may decrease, but total welfare for society will -.

deadweight loss producer surplus consumer surplus increase

Designer clothing companies typically sell their newest products at - boutique shops and upscale department stores to attract consumers with - demand. At the end of a season, the companies will often move the leftover items to outlet stores, which are less conveniently located and where prices are lower. This attracts consumers with -demand for the product.

full-price inelastic elastic

In price discrimination, firms can charge a higher price to consumers with - demand, and a lower price to consumers with - demand. This reduces - and increases the welfare of society. However, price discrimination can only be practiced if the firm is a -.

inelastic elastic deadweight loss price maker

Airlines can price discriminate for seats on a plane by determining people's - to pay for different types of seats. Although not all customers will pay to check a bag, the airline makes more - because it can divide customers into - groups. Those who do not want to pay to check a bag have - demand and will pack everything in a carry-on. Customers who have - demand for checked luggage will pay to check their bags.

willingness, revenue, two, elastic, inelastic

Elastic

Taking kids to a restaurant that offers discounts for children under a certain age Seeing a movie showing at 1:30 in the afternoon Buying in bulk to get a low price

perfect competition

A, B, and C are all consumer surplus.

perfect price discrimination

A, B, and C are all producer surplus.