ECOM 202 MOD 12

After a severe hurricane in South Carolina, the price of electric generators quadrupled. People living outside of South Carolina purchased electric generators in their home states and drove them to South Carolina to sell at a much higher price. What is this an example of? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a arbitrage b perfect price discrimination c price gouging d marginal-price geography

a arbitrage

Tying is a form of price discrimination in which one good called the ____ is tied to a second good called the ____. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a base good; variable good b physical; service good c physical good; nonphysical good d mother good; spawned good

a base good; variable good

Which of the following is NOT an example of bundling? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a cell phones and phone calls b computer software c automobiles and engines d McDonald's value meals

a cell phones and phone calls

Bundle pricing makes sense for cable operators because: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a customers have a high willingness to pay for some channels and a low willingness to pay for others. b customers are more satisfied with more channels being offered. c the cost of operation decreases with bundle pricing. d the marginal costs of adding additional channels is high.

a customers have a high willingness to pay for some channels and a low willingness to pay for others.

Pfizer sells Atgam in New Zealand for $14 per pill and in Brazil for $8 per pill. This implies that the demand curve in New Zealand must be ____ than in Brazil. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a more inelastic b less inelastic c more elastic d closer to perfectly elastic

a more inelastic

Which of the following is an example of tying? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a restrictions that prohibit patrons from bringing their own wine to restaurants b set menus at a restaurant c buy-one-get-one-free offers d Òvalue mealsÓ at fast-food restaurants

a restrictions that prohibit patrons from bringing their own wine to restaurants

Suppose there are two types of cable TV viewers. The first type places a high value on sports channels (e.g., ESPN, Fox Sports, and The Golf Channel) and a low value on all other channels. The second type places a high value on music channels (VH1, MTV3, and CMT) and a low value on all other channels. In this case, we would expect cable operators to: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a sell sports and music channels in one bundle to both types of viewers. b sell only sports channels to the first type of viewers and sell only music channels to the second type of viewers. c use Ò la carteÓ pricing. d use fixed-cost pricing.

a sell sports and music channels in one bundle to both types of viewers.

Tying is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. 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 the practice of a firm selling one product that requires the consumer to purchase another of the firm's products.

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: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a both Market A and Market B worse off. b Market A no worse off but consumers in Market B worse off. c Market B no worse off but consumers in Market A worse off. d both markets better off, as single pricing is always better for consumers than price discrimination.

b Market A no worse off but consumers in Market B worse off.

Disneyland sells goods that are largely: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a tied. b bundled. c aggregated. d separated.

b bundled.

Price discrimination is considered bad when ____, but good when ____. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a it increases output; it decreases output b it decreases output; it increases output c it increases deadweight loss; it decreases deadweight loss d it increases prices; it decreases prices

b it decreases output; it increases output

Universities practice price discrimination by: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a charging students with the same residency status different rates of tuition. b offering students different levels of scholarship support. c requiring freshmen to live on campus. d requiring each student take a set number of general education courses.

b offering students different levels of scholarship support.

Economists call selling the same product at different prices to different customers: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a price racism. b price discrimination. c arbitrage. d bundling.

b price discrimination.

Consumers are ____ with price discrimination than with single pricing. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a always better off b sometimes better off c never better off d neither better off nor worse off

b sometimes better off

Price discrimination is considered bad when: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a total surplus increases. b total surplus decreases. c deadweight loss is diminished. d it is practiced by any firm.

b total surplus decreases.

The difference between tying and bundling in pricing strategies is that: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a they both are strategies that firms use to maximize profit. b tying does not require the purchase of both goods, but bundling does. c tying involves the combination of goods that are complements, whereas bundling involves the combination of substitutes. d tying does not lead to as much profit as bundling does.

b tying does not require the purchase of both goods, but bundling does.

How does price discrimination increase social surplus? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It distributes deadweight loss over many different groups. b It lowers prices for certain groups. c It expands the output that a firm would otherwise produce. d It doesn't increase social surplus.

c It expands the output that a firm would otherwise produce.

Which of the following statements is TRUE about price discrimination? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Price discrimination makes consumers worse off due to higher prices. b Price discrimination leads to deadweight loss and therefore makes the market less efficient. c Price-discriminating monopolists often produce more output than single-price monopolists and increase total surplus in the process. d Price discrimination is illegal in the United States.

c Price-discriminating monopolists often produce more output than single-price monopolists and increase total surplus in the process.

Tying is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the practice of selling complement goods together. b a way for firms to lower costs. c a type of price discrimination. d typically easy to spot.

c a type of price discrimination.

If cable television operators did not practice bundling, we would most likely see: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a lower overall costs of cable television. b higher quality programming. c fewer cable television stations. d more innovation in the cable television industry.

c fewer cable television stations.

Bundling can increase efficiency especially when: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a both fixed costs and marginal costs are high. b both fixed costs and marginal costs are low. c fixed costs are high and marginal costs are low. d fixed costs are low and marginal costs are high.

c fixed costs are high and marginal costs are low.

Price discrimination can be defined as: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a selling different products to the same consumers in the same market. b selling the same product in two different markets. c selling the same product at two different prices in two different markets. d exporting goods to foreign countries.

c selling the same product at two different prices in two different markets.

Price discrimination is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a always better than single pricing. b always worse than single pricing. c sometimes better and sometimes worse than single pricing. d illegal in many countries.

c sometimes better and sometimes worse than single pricing.

Why would firms use the practice of tying? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It allows firms to tie goods that are highly valued together with goods that are not highly valued, hence increasing profits for firms. b It is a way to force consumers to buy more than what they would without tying. c It is a subtle way to raise prices for those consumers who have a low willingness to pay. d It is a subtle way to charge higher prices to those consumers with a high willingness to pay, and a lower price to consumers with a low willingness to pay.

d It is a subtle way to charge higher prices to those consumers with a high willingness to pay, and a lower price to consumers with a low willingness to pay.

The chapter opens with a story about GlaxoSmithKline (GSK) and Combivir, the anti-AIDS drug. What was one of the reasons that GSK was selling Combivir for such low prices in Africa as compared to Europe? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It is much cheaper to produce the drug in Africa than in Europe. b Government regulations in Europe forced it to charge higher prices. c African governments imposed price ceilings. d Lower prices were charged for humanitarian reasons.

d Lower prices were charged for humanitarian reasons.

Which of the following is NOT an example of tying? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a game consoles and game cartridges b cell phones and phone calls c printers and print cartridges d automobiles and engines

d automobiles and engines

Arbitrage is ____ in one market and ____ in another market. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a selling low; buying higher b selling high; buying higher c buying high; selling lower d buying low; selling higher

d buying low; selling higher

In order for a firm to successfully use tying,: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the firm must sell the base good for 50% more than the second good. b the firm must sell the base good at a lower price than the second good. c the firm must charge the same price for the base good and the second good. d it must be difficult for other firms to sell the second good.

d it must be difficult for other firms to sell the second good.

An important lesson of price discrimination is that: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a price discrimination will always lead to lower profits in one of the two markets. b firms can increase profits by differentiating their product attributes. 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 it only increases profits when the demand curves in two different markets are not the same.

Total surplus increases with practice of price discrimination only if: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a consumer surplus increases. b producer surplus increases. c price increases. d output increases.

d output increases.

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: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a price manipulation. b price exploitation. c international price mediation. d price discrimination.

d price discrimination.

Bundling can increase efficiency when fixed costs are high because the fixed costs are: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a offset by increasing marginal costs. b offset by increasing variable costs. c lower when goods are bought in a package. d spread across more consumers.

d spread across more consumers.

If a monopolist is able to perfectly price discriminate, then: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a they will be able to charge every consumer a price equal to their marginal cost of production. b arbitrage will not exist. c prices will fall for those individuals with very inelastic demands. d there will be zero deadweight loss to society.

d there will be zero deadweight loss to society.

Hewlett Packard's pricing scheme is to sell printers at relatively low price and ink cartridges at relatively high price. This practice is known as: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a leverage. b predation. c retail maintenance. d tying.

d tying.

Which of the following statements is FALSE?I. If the demand curves are different, it is more profitable to set a single price than different prices in markets.II. To maximize profit the firm should set a lower price in markets with more elastic demand.III. The presence of arbitrage makes it easy for a firm to price discriminate. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a I only b I and II only c II only d III only e I and III only

e I and III only

The Gillette Fusion razor sells for approximately $10.00, and a four-set of replacement blades sells for over $8. Which of the following statements is TRUE? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Consumers with a high willingness to pay for being clean-shaven will buy many replacement blades.II. Consumers with a low willingness to pay for being clean-shaven will rarely buy replacement blades.III. Gillette's high price for the replacement blades is a method to extract consumer surplus from those consumers with a high desire to be clean-shaven. b I and II only c II and III only d III only e I, II, and III

e I, II, and III