Ch 14 EC

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) perfect price discrimination. B) insightful pricing. C) pricing market-to-market. D) price tying.

A

In general, price discrimination exists because: A) higher prices are charged because some customers are willing to pay more. B) lower prices are possible when profits are not a goal of the entrepreneur. C) higher prices are required when costs are higher. D) lower prices encourage arbitrage.

A

Price discrimination can be defined as: A) selling the same product at two different prices in two different markets. B) exporting goods to foreign countries. C) selling different products to the same consumers in the same market. D) selling the same product in two different markets.

A

Tying is: A) the practice of a firm selling one product that requires the consumer to purchase another of the firm's products. B) the practice of buying one unit at full price and the second unit at half off. C) the same thing as buy one get one free. D) the practice of a firm's paying the sales tax in exchange for a consumer's purchase of an extended warranty.

A

Under perfect price discrimination: A) each customer is charged his or her maximum willingness to pay. B) each customer is charged the average price that others with his or her characteristics are willing to pay. C) markets are segmented and each segment is charged a markup inversely proportional to the elasticity of demand. D) it is easy to arbitrage.

A

Airlines try to differentiate their customers by willingness to pay based on: A) the ethnicity of a person's last name. B )All of the answers are correct. C) how long in advance a person books their flight. D) a person's weight.

C

Hewlett Packard's pricing scheme is to sell printers at a relatively low price and ink cartridges at a relatively high price. This practice is known as: A) leverage. B) predation. C) tying. D) retail maintenance.

C

The difference between tying and bundling is that: A) bundled goods are sold one to many, while tied goods are sold one to one. B) bundling is more restrictive than tying. C) bundled goods are sold one to one, while tied goods are sold one to many. D) tying is more restrictive than bundling.

C

Which of the following is an example of price discrimination? A) holiday sales at retail stores B) value meals at fast-food restaurants C) senior citizen discounts D) tax-exempt status for nonprofit organizations

C

bundling

requiring that products be bought together in a bundle or package

price discrimination

selling the same good at different prices to different buyers

Arbitrage

taking advantage of price differences for the same good in different markets by buying low in one market and selling high in another market

How does price discrimination help cover fixed costs? A) If price discrimination lowers profits, firms will produce less and have lower fixed costs. B) Consumers with elastic demand are less costly to serve, lowering the fixed costs of production. C) Consumers with inelastic demand are less costly to serve, lowering the fixed costs of production. D) If price discrimination expands the size of the market, the fixed costs can be spread over a much larger output level.

D

To maximize profit the monopolist should set a: A) higher price in markets with more elastic demand. B) higher price in markets with more inelastic demand. C) lower price in markets with less elastic demand. D) lower price in markets with more inelastic demand.

B

Total surplus increases with the practice of price discrimination only if: A) price increases. B) output increases. C) consumer surplus increases. D) producer surplus increases.

B

Which of the following conditions would prevent a firm from setting different prices in different markets? A) government intervention forcing the firm to reduce the level of output B) possibility of arbitrage for buyers between different markets C) law enforcement preventing smuggling from occurring D) government imposition of a price ceiling

B

Bundling is expected to provide greater profits when the two bundled goods are: (Pick more than 1) A) substitutes. B) goods that have high fixed costs and low marginal costs. C) very close complements.

B C

Perfect price discrimination is characterized by charging: A) customers a different price, depending on their income. B) customers a different price, depending on their gender. C) prices that are different from competitor's prices. D) each customer a price equal to his or her maximum willingness to pay

D

When looking at a firms behavior, you know it is engaging in price discrimination when it: A) charges customers more than they would prefer to pay B) asks about personal information such as race, gender, and sexual orientation before offering services C) does not accept payment with a smart phone D) charges a different price to different customers that is not reflective of the firm's costs.

D

Which of the following is an example of tying? A) set menus at a restaurant B) buy-one-get-one-free offers C) "value meals" at fast-food restaurants D) restrictions that prohibit patrons from bringing their own wine to restaurants

D

Which of the following statements is TRUE? A) Even if demand curves are identical, it is still typically profit maximizing for monopolists to charge different prices in different markets. B) Arbitrage makes it easier for firms to set different prices in different markets. C) Monopolists typically prefer not to segment markets. D) To maximize profits, monopolists will always set a higher price in markets with more inelastic demand curves.

D

perfect price discrimination (PPD)

each customer is charged his or her maximum willingness to pay