CHAPTER 10

Which of the following sellers faces the least competitive pressure? -an oligopolist with a few direct rivals -one of 800 sellers in a market, each producing a differentiated product -one of 800 sellers in a market, each producing identical products -a monopolist with no direct rivals

a monopolist with no direct rivals

How does price discrimination move a market that is not perfectly competitive to an efficient output level? -Price discrimination gives businesses the incentive to increase output to the level where their marginal cost equals the marginal benefit of their last customer. -Price discrimination causes a business to raise its output to the level where the average cost is at its minimum. -Price discrimination causes businesses to charge the price where marginal cost equals marginal benefit for all customers. -Price discrimination gives businesses the incentive to move revenue to its highest possible level.

Price discrimination gives businesses the incentive to increase output to the level where their marginal cost equals the marginal benefit of their last customer.

How can a company's research and development expenditures create a barrier to entry into its market? -It increases switching costs, which means companies cannot change production techniques. -It generates larger network effects for the product. -It can result in new production technologies that reduce the cost of production. -It prevents learning by doing, which keeps consumers from learning about new options.

It can result in new production technologies that reduce the cost of production.

Which of the following is NOT an outcome of a market where sellers have market power? -Lower costs -Higher prices -Larger economic profits -An inefficiently small output

Lower costs

Classify the statements as either true or false. Firms do not have an incentive to price discriminate because it results in some groups paying a lower price than others.

false

Classify the statements as either true or false. Perfect price discrimination occurs when perfectly competitive firms charge some people higher prices than others.

false

Classify the statements as either true or false. Price discrimination is illegal under all circumstances.

false

Classify the statements as either true or false. Price discrimination only occurs with natural monopolies.

false

Perfect price discrimination is mostly hypothetical. However, as data mining becomes more ubiquitous, we can expect markets to (move further away/ increasingly resemble) perfect price discrimination, as (companies amass more information about individual consumers' preferences/ consumer's tastes become more varied, making them increasingly difficult to track)

increasingly resemble; companies amass more information about individual consumers' preferences

If a monopolist engages in perfect price discrimination: -it produces the efficient quantity of output. -there is no producer surplus. -the producer surplus is equal to the monopoly profit. -the government will impose an average cost pricing rule on the monopoly.

it produces the efficient quantity of output.

The competitive forces in a market largely determine the _____ of the companies in the market. -demand -short-term vision -long-term profitability -product

long-term profitability

Consider each of the four market structures. Identify the characteristics associated with each market structure and place the seven statements in the appropriate category. (perfect competition, monopolistic competition, oligopoly, monopoly) there are a few firms and the ease of entry of new firms is low

oligopoly

Which of the following is NOT one of the five forces that determine the structure of competition in a market? -the bargaining power of buyers -the existing market price -competition from existing competitors -potential competitors

the existing market price

Classify the statements as either true or false. All else being equal, single price monopolists earn lower profits than firms that can price discriminate.

true

Classify the statements as either true or false.\ Airlines are often able to price discriminate.

true

Sergio sells identical shirts under two brand names — Rags and Bees. The shirts with the Rags label sell for $70, and the shirts with the Bees label sell for $40. The Rags shirts hang wrinkle-free on a hanger, and the Bees shirts are folded and have some wrinkles. This is an example of price discrimination through -using shopping around to create a hurdle. -using an imperfect product to create a hurdle. -segmenting into groups based on customer income. -assuming that customers are unaware of quality.

using an imperfect product to create a hurdle

In which of the following cases would a company's profits be threatened? -The threat of potential substitutes for its product diminishes. -Barriers to entry into its industry rise. -Its customers face higher switching costs. -One of its key input providers gains market power in the input market.

One of its key input providers gains market power in the input market.

Under perfect price discrimination, sellers benefit, because they can thereby sell their products at maximum prices. Buyers with smaller marginal benefits (also/ do not) benefit, because (higher prices reduce consumer surplus/ perfect price discrimination enables some consumers to purchase items that they otherwise could not purchase)

perfect price discrimination enables some consumers to purchase items that they otherwise could not purchase

Bree's Bait Shop is a successful store that specializes in highly effective fishing tackle. Bree has employed a high‑tech computer tracking system that allows her to separate her customers into two different groups of consumers with differing price elasticities of demand. Bree is interested in increasing her profits through price discrimination and approaches your marketing firm for advice. Assuming her demand curve is downward sloping, you tell her there is one more crucial piece of information you must have in order to advise her. What do you ask Bree? -What is your current output? -Are you currently producing where MR=MC? -Are you able to prevent the resale of your tackle? -What are your fixed costs?

Are you able to prevent the resale of your tackle?

In which of the following situations would the supplier have the greatest power to hurt a business that is its customer? -The cost for the business to switch to a different supplier is low. -The supplier is one of 100 companies selling the input needed by the business. -The supplier rents building space to a bakery in a real estate market with a vacancy rate of less than .5%. -The business could use an alternative input mix that uses significantly less of the supplier's product.

The supplier rents building space to a bakery in a real estate market with a vacancy rate of less than .5%.

Under Armour products are produced by many different manufacturers located in multiple countries. This serves to reduce the threat of (bargaining power of suppliers/ bargaining power of buyers)

bargaining power of suppliers

Consider each of the four market structures. Identify the characteristics associated with each market structure and place the seven statements in the appropriate category. (perfect competition, monopolistic competition, oligopoly, monopoly) a single firm that produces a unique product with no close substitutes

monopoly

A 2009 article in the Economist explained a barrier to entry that existed 40 years ago for foreign banks wanting to operate in Britain. Foreign banks could not operate in Britain unless they had an office that was within walking distance of the Bank of England, which served as the industry's regulator at the time. This requirement served as a barrier to entry into the banking industry in Britain because -existing banks threatened to crush any competitors that entered the market. -office space within walking distance to the Bank of England was limited -there was a surplus of office space in this area of London. -customers faced high switching costs to transfer their bank accounts to foreign banks.

office space within walking distance to the Bank of England was limited

When segmenting your market demand into groups, base them on _____ and _____ characteristics. -equal; unifying -income; preference -verifiable; difficult-to-change -easy-to-observe; demand-unifying

verifiable; difficult-to-change

For each case, indicate which barrier to entry applies China's control of the market for rare earths (a group of minerals used to produce electronics): -Legal barrier -Network externalities -Economies of scale -Brand loyalty -Control of a resource

Control of a resource

A company produces a particular cell phone that requires accessories (such as chargers, cases, and ear plugs) that are specific to that phone and cannot be used with phones manufactured by other companies. The company that produces this cell phone is using what strategy to create a barrier to entry? -Creating cost advantages. -Intimidating rivals. -Controlling the markets for key inputs needed by all firms in the product market. -Increasing switching costs to ensure demand for its product.

Increasing switching costs to ensure demand for its product.

Which of the firms is most likely to be a natural monopoly? -A pharmaceutical company that has the exclusive right to sell a patented drug. -A firm that owns nearly all of the diamond mines in the world. -Municipal Power Light, the local supplier of electricity. -A restaurant that is unable to practice price discrimination and must charge all consumers the same price.

Municipal Power Light, the local supplier of electricity.

Each of the given statements may fit into one of the three categories: perfect price discrimination; imperfect price discrimination; or bundling Microsoft offers student discounts for its computer software products. Non-students pay higher prices

Imperfect price discrimination

Perfect price discrimination is characterized by charging -customers a different price, depending on their income. -customers a different price, depending on their gender. -different prices to customers based on when they purchase the good or service. -prices that are different from competitors' prices. -each customer a price equal to his or her maximum willingness to pay.

each customer a price equal to his or her maximum willingness to pay.

When setting prices for different groups of customers, a manager should charge lower prices to groups that -have a higher demand. -value the product more. -have a more inelastic demand. -have a more elastic demand.

have a more elastic demand.

Consider Uncle Joe's Pizza Pies on University Avenue. Uncle Joe is subject to competition and his prices reflect this. Please classify the statements by whether, if true, they will increase or decrease Uncle Joe's prices for his famous pizza pies. Note that these statements need not be considered together. The refrigerators at every dairy wholesaler but one stop working, leaving just one cheese seller in the area

increase price

Consider Uncle Joe's Pizza Pies on University Avenue. Uncle Joe is subject to competition and his prices reflect this. Please classify the statements by whether, if true, they will increase or decrease Uncle Joe's prices for his famous pizza pies. Note that these statements need not be considered together. This is the only pizza shop that is convenient to campus, so college students must buy their pizza here

increase price

Arturo makes and sells organic frozen yogurt with fresh fruit toppings. He wants to price discriminate according to a preference for organic food so that those with the most inelastic demand for organic food pay the highest price. To accomplish this, to which group should he give discount coupons for his yogurt? -Customers of the local fast-food restaurant -Students at the local art school -People who come to the community's weekly farmer's market -Members of the local organic food co-op

Customers of the local fast-food restaurant

Consider Uncle Joe's Pizza Pies on University Avenue. Uncle Joe is subject to competition and his prices reflect this. Please classify the statements by whether, if true, they will increase or decrease Uncle Joe's prices for his famous pizza pies. Note that these statements need not be considered together. There are hamburger and hot dog stands on the same street

Decrease price

Consider Uncle Joe's Pizza Pies on University Avenue. Uncle Joe is subject to competition and his prices reflect this. Please classify the statements by whether, if true, they will increase or decrease Uncle Joe's prices for his famous pizza pies. Note that these statements need not be considered together. There is another pizza shop that delivers to campus

Decrease price

For each case, indicate which barrier to entry applies Pfizer's control of the production of Viagra: -Network externalities -Brand loyalty -Control of a resource -Economies of scale -Legal barrier

Legal barrier

For each case, indicate which barrier to entry applies The local utility company that can provide electricity to the entire market at a lower average cost than other producers: -Brand loyalty -Legal barrier -Natural monopoly -Control of a resource -Network externalities

Natural monopoly

For each case, indicate which barrier to entry applies Facebook's position in social media: -Legal barrier -Economies of scale -Control of a resource -Network externalities

Network externalities

When a product is characterized by network effects, then the product _____ when more customers use the product. -drops in price -is compatible with more and more other products -becomes more valuable to each customer -is sold to other companies or organizations that have a group of customers

becomes more valuable to each customer

Each of the given statements may fit into one of the three categories: perfect price discrimination; imperfect price discrimination; or bundling customers of the Charter Cable company who want to watch HBO channels must subscribe to a premium channel package that includes HBO, Cinemax, and Showtime channels

bundling

The Clean Company sells a bottle of bathroom cleaner for $4 and a grout brush for $3. It offers a special deal for a package containing both the bathroom cleaner and the grout brush for $5. This type of quantity discount is known as -bundling. -imperfect goods. -shopping around. -group pricing.

bundling.

Which of the following is correct about the discount effect facing companies in perfectly and imperfectly competitive markets? Companies in perfect competition _____ it. Companies in imperfect competition _____ it. -face; face -do not face; do not face -face; do not face -do not face; face

do not face; face

Which of the following government policies would create a direct barrier to entry for new sellers in a market? -banning switching costs to protect consumers -taxing business profits with a progressive tax -granting a patent to the developer of a new product -ensuring that all sellers have equal access to inputs

granting a patent to the developer of a new product

Most stores offer rotating promotions that provide discounts on various products. However, at many of them, you must become a rewards member to take advantage of the deals. The price of the membership is free. You are probably familiar with this process at grocery stores, pharmacies, and even pet supply chains. Rewards membership offerings benefit stores by enabling them to (multiple answers) -gain a unique competitive advantage, so that they can dominate the market. -make sales they would not otherwise make. -track data, such as buying habits, on their customers.

make sales they would not otherwise make.; track data, such as buying habits, on their customers.

Consider each of the four market structures. Identify the characteristics associated with each market structure and place the seven statements in the appropriate category. (perfect competition, monopolistic competition, oligopoly, monopoly) the single firm has considerable control over the price it charges for the product it produces, and the entry of new firms into the industry is blocked

monopoly

Consider each of the four market structures. Identify the characteristics associated with each market structure and place the seven statements in the appropriate category. (perfect competition, monopolistic competition, oligopoly, monopoly) individual firms are price takers, and firms can easily enter or exit the industry

perfect competition

Duolingo is a widely used foreign language app, with 300 million users in 2018. While there is a free version of the app, a premium Duolingo subscription eliminates advertisements during language practice and offers new quizzes with the ability to save lessons for offline use. By offering both a free and a premium version of the app, Duolingo -profits more than it would if it offered just one version of the app. -profits only from the free version, not the premium version. -profits less than it would if it offered just one version of the app. -profits only from the premium version, not the free version.

profits more than it would if it offered just one version of the app.

When setting prices for different groups of customers, a manager should charge higher prices for groups that -have a lower demand. -have lower marginal benefit. -have a more elastic demand. -value the product more.

value the product more.

Consider Uncle Joe's Pizza Pies on University Avenue. Uncle Joe is subject to competition and his prices reflect this. Please classify the statements by whether, if true, they will increase or decrease Uncle Joe's prices for his famous pizza pies. Note that these statements need not be considered together. A restaurant owner from the next town over expresses interest in opening a pizza shop across the street

Decrease price

How would the discount effect on marginal revenue differ for a seller increasing sales from 100 units to 101 units compared to an increase in sales from 1,000 units to 1,001 units? -The discount effect would be the same in both situations and would be less than price. -The discount effect would be the same in both situations and would be larger than price. -The discount effect would be smaller for a change from 100 to 101 units than 1,000 to 1,001 units. -The discount effect would be larger for a change from 100 to 101 units than 1,000 to 1,001 units.

The discount effect would be smaller for a change from 100 to 101 units than 1,000 to 1,001 units.

Hassan is a student who received a coupon to buy pizza from Pizza House at $4 off the regular price. Students at Hassan's school seem to receive the coupons frequently. Which of the following is an assumption that the owners of Pizza House are making about students at Hassan's school? -Their marginal benefit from pizza is very high. -They are price-sensitive. -Their demand for pizza is highly inelastic. -They have a high reservation price for pizza.

They are price-sensitive.

Consider each of the four market structures. Identify the characteristics associated with each market structure and place the seven statements in the appropriate category. (perfect competition, monopolistic competition, oligopoly, monopoly) many firms that produce a differentiated product

monopolistic competition

Under Armour sells much of its product to large retailers such as Dick's Sporting Goods or Macy's, which then sell to end consumers. These large retailers also purchase from Nike and other sports apparel companies. This creates the threat of (bargaining power of customers/ bargaining power of suppliers)

bargaining power of customers

What is a natural monopoly? -A monopoly resulting from one firm's exclusive ownership of a natural resource required to produce a good. -A monopoly that results from government issuing patents. -A monopoly that faces a high fixed cost and low marginal costs so that the average total cost curve slopes downward. -A market in which there is only one firm.

A monopoly that faces a high fixed cost and low marginal costs so that the average total cost curve slopes downward.

Which of the scenarios is the best example of a firm practicing perfect price discrimination? -An airline that charges higher fares to customers who purchase their tickets within one week of the flight. -A psychic who is able to divine exactly what her information is worth to each customer. -A Cancun hotel that increases the price of a room during spring break. -A restaurant that offers an "early bird special" to any customer that eats dinner before 5 p.m.

A psychic who is able to divine exactly what her information is worth to each customer.

Each of the given statements may fit into one of the three categories: perfect price discrimination; imperfect price discrimination; or bundling Kohl's department store offers a 15% discount every Wednesday to senior citizens

Imperfect Price Discrimination

A characteristic of oligopoly that is not present in other market structures is that there -are many sellers and each produces a differentiated version of the product. -are a small number of sellers and they have market power. -is only one seller and that seller holds a high level of market power. -are many sellers that produce identical products.

are a small number of sellers and they have market power.

For each case, indicate which barrier to entry applies Coca‑Cola's vast market share in the soft drink market: -Control of a resource -Brand loyalty -Legal barrier -Network externalities

Brand loyalty

A certain city has four hospitals, and there are no other hospitals within 200 miles. Two of the hospitals are more specialized than the other two because one has a large cardiac unit and the other has a specialized cancer-treatment center. The local market for hospital services is what type of market? -Oligopoly -Perfect competition -Monopoly -Monopolistic competition

Oligopoly

Michelle owns an independent bookstore and has observed that college graduates read more than people without degrees. She is considering offering a 10% discount on book purchases to customers who have a postsecondary degree. Why might Michelle's plan hurt rather than help her business? (multiple answers) -People who read more books are likely to have a higher willingness to pay than others. -People with higher education typically earn more than others and so may have a higher willingness to pay. -Whether an individual has a postsecondary degree is not easily verifiable. -High educational achievement is not a difficult-to-change characteristic.

People who read more books are likely to have a higher willingness to pay than others; People with higher education typically earn more than others and so may have a higher willingness to pay; Whether an individual has a postsecondary degree is not easily verifiable.

In which of the following situations would a company have a lower chance of losing customers when it raises the price of its product? -There are low switching costs. -Customers have many sellers to choose from. -Companies advertise their prices. -The product is differentiated across companies.

The product is differentiated across companies.

Customers would be less loyal and more price sensitive in which of the following situations? -There is only one seller in the market. -Customers are aware of the prices of all sellers. -The switching costs are low. -The market's companies sell differentiated products.

The switching costs are low.

In 2018, Spotify was available in many countries around the world. The same year, Spotify offered an attractive deal available only to students—Spotify Premium, Hulu Limited, and Showtime, all for one monthly payment of $4.99. The fee is half the amount charged for a standard Spotify Premium account. To qualify for the deal, students must provide their information, such as name and birthdate, to Spotify and its third-party partner, SheerID. SheerID is a verification service utilized by companies to confirm various personal attributes and qualifications. In this case, your current student status at a Title IX school is in a database, which is accessed by SheerID. By requiring third-party verification for the discount, rather than simply requiring an ".edu" e-mail address—as many other retailers do—Spotify effectively -ensures that its discount only applies to students, as opposed to professors or others employed at universities. -narrows the consumer base to students with the highest reservation prices. -narrows the consumer base to students with the lowest reservation prices.

ensures that its discount only applies to students, as opposed to professors or others employed at universities.; narrows the consumer base to students with the lowest reservation prices.

Perfect competition achieves allocative efficiency because the market price is _______ and productive efficiency because firms produce ______ in a perfectly competitive outcome. A monopoly outcome usually fails to be allocatively efficient because the market price is _______ and usually fails to reach productive efficiency because the monopolist produces _____ marginal cost in a monopoly outcome.

equal to firms' marginal cost; at minimum average total cost; greater than the marginal cost; where average total cost is greater than

Monopolistic competition is a market characterized by -many sellers that produce different versions of the same product. -many sellers that produce identical products. -one seller that competes against itself. -a few sellers that can impact the other sellers through their actions.

many sellers that produce different versions of the same product.

Consider each of the four market structures. Identify the characteristics associated with each market structure and place the seven statements in the appropriate category. (perfect competition, monopolistic competition, oligopoly, monopoly) the demand curve for an individual firm's output is a horizontal line

perfect competition

Duolingo is a widely used foreign language app, with 300 million users in 2018. While there is a free version of the app, a premium Duolingo subscription eliminates advertisements during language practice and offers new quizzes with the ability to save lessons for offline use. Identify each hurdle for users of the free version of the app.(multiple answers) -the subscription fee paid for the premium version of the app -the advertisements that users of the free version must endure -the absence of enhanced features—new quizzes and the ability to save lessons for offline use—enjoyed by users of the premium version

the advertisements that users of the free version must endure; the absence of enhanced features—new quizzes and the ability to save lessons for offline use—enjoyed by users of the premium version

Heri owns one of three shoe repair shops in his city. Then he loses some of his customers when a luggage repair shop expands its services to include shoe repair as well as luggage repair. Which of the five forces in the Five Force framework is Heri facing when the luggage shop expands its services? -threat of entry -bargaining power of buyers -threat of potential substitutes -threat of existing competitors

threat of entry

Following the Rational Rule for Sellers, how does output for a seller who has market power compare to output for a seller who does not have market power? -Output is higher with market power than without market power. -The level of market power has no impact on output. -Output is the same in both situations. -Output is higher without market power than with market power.

Output is higher without market power than with market power.

Consider a case of possible price discrimination: lunch specials at restaurants. Some restaurants may offer a soup and salad for five dollars during lunch hours and offer the same dish for eight dollars during dinner hours. Suppose that the soup and salad is the cheapest dinner option, and that the restaurant, although usually only half full during lunch hours, is often full enough during dinner hours that people end up choosing to eat elsewhere because of the wait. In what way might this difference in prices not be price discrimination? -Since different customers pay different prices for an otherwise identical meal, this must be price discrimination. -People that come in and order the soup and salad for dinner might cause customers who would have ordered a more expensive meal to instead eat elsewhere because of the wait. As such, the marginal costs of the two meals to the restaurant are different; thus, this is not necessarily price discrimination. -The restaurant does not have its servers try to identify the elasticity of the individual demand curves of its customers and then charge different prices, so this is not price discrimination. -People often pay more for dinner than they do for lunch. If the price of a soup and salad during lunch relative to the average lunch price is the same as the price of a soup and salad during dinner relative to the average dinner price, then the restaurant is not price discriminating, since the relative prices are equal. -People might be willing to pay more for soup and salad during dinner hours, so the restaurants are not price discriminating since they are simply charging a higher price to people that are willing to pay the higher price.

People that come in and order the soup and salad for dinner might cause customers who would have ordered a more expensive meal to instead eat elsewhere because of the wait. As such, the marginal costs of the two meals to the restaurant are different; thus, this is not necessarily price discrimination.

In 2018, Spotify was available in many countries around the world. The same year, Spotify offered an attractive deal available only to students—Spotify Premium, Hulu Limited, and Showtime, all for one monthly payment of $4.99. The fee is half the amount charged for a standard Spotify Premium account. To qualify for the deal, students must provide their information, such as name and birthdate, to Spotify and its third-party partner, SheerID. SheerID is a verification service utilized by companies to confirm various personal attributes and qualifications. In this case, your current student status at a Title IX school is in a database, which is accessed by SheerID. In making this offer to students, Spotify is (multiple answers) -engaging in group pricing, where the market segments are students and nonstudents. -engaging in perfect price discrimination, charging each individual based on her or his willingness to pay. -using the hurdle method, getting people to self-identify their willingness to pay by requiring them to overcome one or more obstacles.

engaging in group pricing, where the market segments are students and nonstudents.; using the hurdle method, getting people to self-identify their willingness to pay by requiring them to overcome one or more obstacles.

Brands such as Nike and Adidas also sell athletic footwear and apparel. This creates the threat of (competition from existing competitors/ competition from potential entrants)

competition from existing competitors

The sports apparel market requires a significant investment in capital costs for branding, advertising, and creating product demand. This serves to reduce the threat of (competition from existing competitors/ competition from potential entrants)

competition from potential entrants

Consumer surplus will _____ when a monopolist goes from single-price monopoly to perfect price discrimination. -remain the same -increase -decrease -initially increase and then return to its original level

decrease

Which statement describes a monopoly? -Many firms produce identical products with no control over the market price. -Many firms produce differentiated products with control over market price. -A single firm produces a product with no close substitutes and control over the market price. -A single firm produces a product with many close substitutes and limited control over the market price.

A single firm produces a product with no close substitutes and control over the market price.

Michelle owns the largest florist shop in her town. Each week, she orders a truckload of flowers from the flower wholesaler. The other two florists in town order only one-third as many flowers. Because Michelle's order fills the delivery truck, the wholesaler sells flowers to her at a lower price than the other florists must pay. How will this situation impact potential new entrants? -New florists will be encouraged to enter because they will be energized by the challenge to succeed. -The cost differential can easily be offset by creating a demand differential, so it will have little impact. -New florists will not be affected because input prices are minor factors in markets. -New florists will be discouraged from entering the market because of the difficulty of competing on cost.

New florists will be discouraged from entering the market because of the difficulty of competing on cost.

Under the Five Forces framework, how can the market power of customers impact a seller's profitability? -The market power reduces the total number of customers, raising market demand. -The market power increases the total number of customers, raising market demand. -Customers with market power can use their leverage to lower the selling price that sellers charge. -They can raise the selling price sellers charge.

Customers with market power can use their leverage to lower the selling price that sellers charge.

Some vending machines on college campuses sell identical items, such as the same bags of potato chips, for two different prices. The low-priced chips generally sell out by the end of the day, leaving the more expensive chips for late-night visitors to the vending machines. What must the vending machine operators think about the demand of people who visit the machine at night relative to those who visit the machine during the day? Why might they think this? -People who buy snacks at night have less elastic demand than people who buy snacks during the day. People buying snacks at night have fewer substitutes from which to choose, since a lot of restaurants and other stores are likely to be closed. -People who buy snacks at night have more elastic demand than people who buy snacks during the day. People buying snacks at night have probably already eaten three full meals. -People who buy snacks at night have less elastic demand than people who buy snacks during the day. People who buy from the vending machines at night are more likely to bring food from home and thus not need food from a vending machine. -People who buy snacks at night have more elastic demand than people who buy snacks during the day. People who are in the building late at night are likely to have an office in which they can store food.

People who buy snacks at night have less elastic demand than people who buy snacks during the day. People buying snacks at night have fewer substitutes from which to choose, since a lot of restaurants and other stores are likely to be closed.

Each of the given statements may fit into one of the three categories: perfect price discrimination; imperfect price discrimination; or bundling At an auction of American art, every buyer ends up bidding and paying a price equal to the maximum amount that he or she is willing to pay

Perfect Price Discrimination

Consider each of the four market structures. Identify the characteristics associated with each market structure and place the seven statements in the appropriate category. (perfect competition, monopolistic competition, oligopoly, monopoly) a very large number of firms that produce an identical product

Perfect competition

Your company sells 19 units at a price of $10 and must change price to $9.90 in order to sell 20 units. What is the marginal revenue of the twentieth unit? -$9.90 -$8.00 -(-$.10) -$198.00

$8.00

Which of the following is NOT an example of the hurdle method of price discrimination? -Providing group discounts to price-sensitive consumers based on an identifiable characteristic. -Making slightly different product versions available at different times at different prices. -Distributing discount coupons that can be turned in to get a lower price. -Fluctuating the product's price over time.

Providing group discounts to price-sensitive consumers based on an identifiable characteristic.

Jordan's food truck sells tacos and burritos. Her most popular items are chicken tacos and beef tacos. Bean burritos are the least popular item on her menu, although some buyers like the burrito's large size compared to the tacos. The tacos and the burritos both sell for $4. Jordan offers a special deal of a taco and a bean burrito for $7. How is this a form of price discrimination? -Those who prefer tacos and those who prefer burritos are induced to get a unit of their less preferred product because they can buy it at a discounted price of $3 by buying a bundle. -Buyers are grouped according to preferences for tacos or burritos. Those who prefer tacos pay a lower price for the taco in the bundle. -Buyers are grouped according to preferences for tacos or burritos. Those who prefer burritos pay a lower price for the burrito in the bundle. -Buyers who buy the bundle are getting less satisfaction per dollar spent because they are getting a less preferred item instead of two of their more preferred items.

Those who prefer tacos and those who prefer burritos are induced to get a unit of their less preferred product because they can buy it at a discounted price of $3 by buying a bundle.

Most stores offer rotating promotions that provide discounts on various products. However, at many of them, you must become a rewards member to take advantage of the deals. The price of the membership is free. You are probably familiar with this process at grocery stores, pharmacies, and even pet supply chains. Identify each hurdle that shoppers must typically clear to obtain these promotional deals. (multiple answers) -divulging personal information, such as one's age and e-mail address -remembering to bring the discount card to the store or providing the clerk with your phone number -taking time to fill out a form

all of the above

A seller's incentive to increase production is reflected in its -market share. -demand curve. -marginal revenue curve. -market equilibrium price.

marginal revenue curve.

A firm's ability to raise its product price without losing many customers to competing businesses is known as -revenue dependability. -market power. -marginal revenue. -competitive power.

market power

In the long run, the number of sellers and the level of profit in a market are both affected heavily by the _____ in the market. -type of product -strength of the barriers to entry -level of variable costs -income tax levels

strength of the barriers to entry

Sears' management failed to consider the effect of services not offered by Sears, such as second-day shipping, which was offered by some online retailers. This is an example of Sears failing to prepare for -buyers using their bargaining power to demand new services. -the intensity of competition among existing competitors. -substitute services that would be appealing to Sears' customer base. -sellers using their bargaining power to offer services not available at Sears.

substitute services that would be appealing to Sears' customer base.

Sears could not compete against the low prices and wide variety offered by Walmart stores. This is an example of Sears failing to prepare for -the threat of new entry into the retail space. -new innovations leading to substitute products and services. -the intensity of competition among existing competitors. -buyers using their bargaining power to demand lower prices.

the intensity of competition among existing competitors.

Perfect price discrimination leads to (the socially efficient/ market output)

the socially efficient

Sears' management disregarded the impact of online retailers entering Sears' market space. This is an example of Sears failing to prepare for -non-price competition with existing competitors. -the threat of new entry into the retail space. -price wars with existing competitors. -the tremendous bargaining power of online retailers.

the threat of new entry into the retail space.