MRU14.1: INTRODUCTION TO PRICE DISCRIMINATION
Which of the following is true about arbitrage? - Arbitrage is easier in markets for services than in markets for goods. - Arbitrage is easier in markets with low demand elasticity than in markets with high demand elasticity. - Arbitrage is easier in markets with high demand elasticity than in markets with low demand elasticity. - Arbitrage is easier in markets for goods than in markets for services.
A: Arbitrage is easier in markets for goods than in markets for services.
Why was GSK selling Combivir to patients in Africa at much lower prices than patients in Europe? - No reason; it appears to have been a mistake - Solely for humanitarian reasons - Both for humanitarian reasons and to maximize profits - Solely to maximize profits
A: Both for humanitarian reasons and to maximize profits
How do airlines attempt to separate business travelers from vacationers? - By charging more for round-trip flights that require a Saturday stay - By charging more for flights paid for with a corporate credit card - By charging more for same-day or next-day flights - By charging more for flights booked far ahead of time
A: By charging more for same-day or next-day flights
The government subsidizes ethanol for use as fuel but does not want subsidized ethanol to be used to produce alcohol. How does it prevent this arbitrage? - By paying subsidies directly to buyers of ethanol for fuel - By requiring that ethanol be poisoned - By placing a tax on alcohol of exactly the same size as the subsidy on ethanol fuel - By making it illegal to convert ethanol to alcohol
A: By requiring that ethanol be poisoned
How did Rohm and Haas address the possibility of arbitrage with respect to its product "MM"? - By clearly labeling MM packaging for use in industrial applications or for use in dentistry - By spreading a rumor that industrial MM had been laced with arsenic - By adding poison to industrial MM - By seeking patent protection for its invention of MM
A: By spreading a rumor that industrial MM had been laced with arsenic
What should a monopoly do if it can segment its market and wishes to maximize profit? - Charge a higher price in the segment with elastic demand - Charge a higher price in the segment with the most buyers - Charge a higher price in the segment with inelastic demand - Charge a higher price in the segment with the fewest buyers
A: Charge a higher price in the segment with inelastic demand
Which of the following is NOT used as an example of price discrimination? - Massages - Airline travel - Movie tickets - Computer software
A: Massages
Why don't more firms price discriminate if it can maximize profits? - Price discrimination is only possible if firms can segment and separate markets. - The public tends to view firms that price discriminate unfavorably. - If a firm is caught price discriminating, it can face significant fines. - Price discrimination is possible in theory only; in practice it is impossible.
A: Price discrimination is only possible if firms can segment and separate markets.
Arbitrage means _______, and arbitrage makes price discrimination _______. - buying at a low price and reselling elsewhere at a high price; more difficult - buying at a low price and reselling at a later time at a high price; easier - selling at a high price and then rebuying at a later time at a low price; more difficult - buying at a high price and reselling elsewhere at a low price; easier
A: buying at a low price and reselling elsewhere at a high price; more difficult
Price discrimination means: - charging the same price for different goods sold to different groups of consumers. - selling the same good to different groups of consumers at different prices. - charging different prices to different groups of consumers based factors such as race or religion. - selling different goods to different groups of consumers at different prices.
A: selling the same good to different groups of consumers at different prices.
