Microeconomics Chapter 14- Exam 2
A monopolist that is able to perfectly price discriminate will end up producing a level of output: a. equal to the efficient market output. b. less than the efficient market output. c. less than the level of output of a monopolist that does not price discriminate. d. greater than the efficient market output.
a
A museum in Russia has two entrances: one for locals (written in Russian) and one for tourists (written in English). People who enter through the entrance written in Russian will end up paying 81.93 rubles ($3.00). English-speaking tourists will use the entrance written in English, but they will end up paying 409.67 rubles ($15.00). This practice is an example of: a. price discrimination. b. price manipulation. c. international price mediation. d. price exploitation.
a
Adults have more money than teenagers and perhaps more inelastic demand for video games than teenage video gamers. Why might it be difficult to price discriminate based on this fact? a. Teenage gamers could exploit arbitrage opportunities, buying games at the low price and reselling them to adult gamers. b. It is not true that adults have more money than teenagers. c. The monopolist might not want to segment the market. d. It is impossible to tell who is a teenager and who is an adult.
a
A company that produces men's electric shavers reasons that people who highly value being clean-shaven will buy a lot of replacement blades; on the other hand, people who place a low value on being clean-shaven will rarely buy replacement blades. What type of pricing strategy will maximize profits for this company? a. charge the same price for the electric shaver and replacement blades b. charge a relatively low price for the electric shaver and a relatively high price for replacement blades c. charge a relatively low price for the electric shaver and offer free replacement blades d. charge a relatively high price for the electric shaver and a relatively low price for replacement blades
b
A firm practices price discrimination by selling at a high price in its larger market, market A, and a lower price in its smaller market, market B. If this firm is forced to sell at a single price in both markets and opts for the original price in market A, the new single-pricing strategy makes consumers in: a. market B no worse off but consumers in market A worse off. b. market A no worse off but consumers in market B worse off. c. both market A and market B worse off. d. both markets better off, as single pricing is always better for consumers than price discrimination.
b
Airlines price discriminate prominently by charging _______ more than _________. a. young adults; senior citizens b. business travelers; vacationers c. vacationers; business travelers d. senior citizens; young adults
b
Economists call selling the same product at different prices to different customers: A. price racism B. price discrimination C. arbitrage D. bundling
b
In which of the following industries may price discrimination be good? A. Industries with poor consumers B. Industries with high fixed costs of production C. Industries with low marginal costs of production D. price discrimination is never good as it lowers total surplus in society
b
A monopolist facing different demand curves in two separate markets maximizes profit by: a. completely ignoring the market with lower demand. b. completely ignoring the market with higher demand. c. setting marginal revenue equal to marginal cost and charging the maximum price that demand will bear in each market. d. setting marginal revenue equal to marginal cost for the combined demand curve and charging the maximum price for that quantity on the combined demand curve.
c
A perfect price-discriminating seller: a. maximizes consumer surplus. b. cannot prevent arbitrage. c. eliminates deadweight loss. d. charges a single price.
c
Price discrimination is good if output: A. falls under price discrimination B. stays the same under price discrimination C. increases under price discrimination D. is no longer produced under price discrimination
c
A perfectly price-discriminating monopolist produces until: a. P = MR. b. MR = AC. c. MR = MC. d. P = MC.
d
A top-performing used-car salesman is able to sell his cars to each customer at their maximum willingness to pay, a practice known as: a. insightful pricing. b. price tying. c. pricing market-to-market. d. perfect price discrimination.
d
Airlines price discriminate by offering both business-class and economy-class service on flights (it's not just the cost of the service that varies; the markup is higher on business class). If they wanted to ensure that everyone who could afford to travel business class did so, what might they do? a. lower the price of traveling economy class b. make the seats in business class extra small and cramped, and serve terrible food c. hire more attractive flight attendants for all classes d. make the seats in economy class extra small and cramped, and serve terrible food
d
An important lesson of price discrimination is that: A. price discrimination always leads to lower profits in one of the two markets B. firms can increase profits by differentiating their products C. all firms can perfectly price discriminate D. it only increases profits when the demand curves in two different markets are NOT the same
d