EC 500 Module 5

Airlines would like to charge a ____________ price to business travelers compared to leisure travelers because business travelers have a ____________ demand than leisure travelers.

Higher; less elastic

​Robinson-Patman Act

declared that some forms of price discrimination is illegal, especially when it decreases competition.

The practice of buying a firm's good in one market at a low price and selling it in another market for a higher price in order to profit from the price difference is known as

Arbitrage

Which of the following is not an example of price discrimination?

Charging a higher price for ice-cream during the summer and a lower price in the winter

After firm A acquired firm B, it lowered the prices for the goods produced by both firms. This can increase profits if the goods are

Complements

A firm practicing direct price discrimination will charge a higher price to

Consumers known to have an inelastic demand

The consequences of price discrimination are

Consummate more transactions ​Extract more consumer surplus Increase producer surplus

Scenic Cinemas surveyed its audience and found that while most movie goers prefer weekends, seniors visit on weekdays. How should the theatre respond?​

Decrease prices for the weekday shows, increase prices on the weekends

​For products like parking lots and hotels, costs of building capacity are mostly fixed or sunk and firms in this industry typically face capacity constraints. Therefore,

If SRMR>SRMC at capacity, then the firms should price to fill capacity

​Indirect price discrimination differs from direct price discrimination because

In indirect price discrimination high value consumers can sometimes still get the low price

The general rule to increase profits when two close substitute brands are jointly owned is

Increase prices for both brands

dvance-purchase discounts offered by airlines are an example of​

Indirect price discrimination

Owners of a parking lot are deciding whether or not to add more parking spaces to the lot. The owners should increase parking spaces as long as:​

LRMR>LRMC

By focusing the customers on the price of a product, you make the demand for the product​

More elastic

For direct price discrimination to work, the firm

Must be able to identify members of the low value group Charge the low-value group lower prices than the rest ​Prevent the low-value group from reselling their low priced goods to higher-valued group

For a cruise liner deciding how to price its rooms, if the cost of overpricing is higher than the cost of underpricing, then the management of the cruise liner should​

Price lower than what they expect would fill capacity

When a firm practices perfect price discrimination,

Producer surplus is maximized

Which of the following is an example of a "metering" strategy

Razors are sold at unit cost while razor blades have large profit margins

Price discrimination is

The practice of charging different prices to different individual buyers or customer groups

A local restaurant increases the prices on its burgers as soon as it begins a promotional campaign. Which of the following is most likely to be true?

The promotional campaign featured how much better their burgers are

​Public transit offers discounted monthly passes to students, which can only be bought and used with valid student IDs. The transit system is using

​A direct discrimination scheme

With no price discrimination, ​

​A firm sells every unit at same prices

​Which of the following is an example of a "damaged goods" strategy

​A television reseller spends time making sure that the picture quality of the bargain priced sets is fuzzy

A parking lot in a busy downtown district is experimenting with its pricing strategy to figure out where it should price its spaces. Which of the following strategies should it implement?​

​If the lot fills up right around 9am the price is right

The "damaged goods" strategy refers to ​

​Incurring additional costs to make the cheaper goods unattractive to high-value users

​Many wines are priced high in order to

​Indicate high quality

Which of the following are ways to sell a customer additional units without dropping the price on previous purchases

​Offer quantity discounts ​Offer two-part pricing ex: membership fees Bundle the goods together