Final Exam Study - Price Discrimination ECON

a) First-degree price discrimination First-degree price discrimination, also known as perfect price discrimination, involves charging each customer the maximum price he or she is willing to pay.

Bob is a painter. When customers come to his studio, he studies their interest and tries to gauge how much they would pay for a piece, attempting to get as much money as possible from each customer. This is an example of which type of price discrimination? a) First-degree price discrimination b) Second-degree price discrimination c) Third-degree price discrimination d) Bob is not practicing price discrimination.

d) This company is not practicing price discrimination. Charging more for different-quality products is not a form of price discrimination.

When a certain company charges more for higher-quality products, which type of price discrimination is it practicing? a) First-degree price discrimination b) Second-degree price discrimination c) Third-degree price discrimination d) This company is not practicing price discrimination.

a) First-degree price discrimination First-degree price discrimination, also known as perfect price discrimination, involves charging each customer the maximum price he or she is willing to pay.

When a certain company is able to secure all the total surplus in a market for itself, which type of price discrimination is it practicing? a) First-degree price discrimination b) Second-degree price discrimination c) Third-degree price discrimination d) This company is not practicing price discrimination.

b) second-degree price discrimination. Second-degree price discrimination occurs when a seller charges different customers different prices based upon the quantities that they purchase. In this case, buying two tubes of toothpaste results in a lower price per tube.

When a certain store sells one tube of toothpaste for $3 but also sells two tubes of toothpaste for $5, this is an example of: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) This store is not practicing price discrimination.

c) Sellers must have higher price elasticities than buyers. This is not required for successful price discrimination.

Which of the following is NOT a requirement for successful price discrimination? a) Sellers must have some market power. b) Sellers must be able to separate the market into different consumer groups based upon their elasticities of demand. c) Sellers must have higher price elasticities than buyers. d) Sellers must be able to prevent arbitrage; that is, it must be impossible or prohibitively expensive for low-price buyers to resell products to higher-price buyers.

a) Sellers must be able to prevent arbitrage. This is a required condition for successful price discrimination.

Which of the following is a requirement for successful price discrimination? a) Sellers must be able to prevent arbitrage. b) Sellers must sell a product that is protected by a patent. c) Sellers must have different price elasticities of supply. d) Sellers must sell a product that has a high profit margin.

a) Sellers must have some market power. For successful price discrimination, sellers must have some market power.

Which of the following is a requirement for successful price discrimination? a) Sellers must have some market power. b) Sellers must sell a product that is protected by a patent. c) Sellers must have different price elasticities of supply. d) Sellers must sell a product that has a high profit margin.

d) A theme park charging $50 for one-day admission and $80 for two-day admission. Price discrimination occurs when a firm charges different consumer groups different prices for the same product.

Which of the following is an example of price discrimination? a) A coffee shop charging more for an espresso than a regular coffee. b) A surf-shop selling last year's surfboards for half price. c) A grocery store charging more for organic fruit. d) A theme park charging $50 for one-day admission and $80 for two-day admission.

b) An airline company selling the same type of seat on the same plane for different prices. Price discrimination occurs when a firm charges different consumer groups different prices for the same product.

Which of the following is an example of price discrimination? a) A fast food company selling large-sized drinks for higher prices. b) An airline company selling the same type of seat on the same plane for different prices. c) A car dealership selling each car at different prices because each car has different features. d) A funeral home selling one family a casket, and another family a cremation.

d) A movie theater that offers a student discount. Price discrimination occurs when a firm charges different consumer groups different prices for the same product.

Which of the following is an example of price discrimination? a) A supermarket that charges a higher price for broccoli the more a certain consumer purchases it. b) An airline company that sells first-class seats for more than they sell coach seats. c) A car dealership that sells each car at different prices because each car has different features. d) A movie theater that offers a student discount.

d) Sotheby's Auction House manages to sell paintings at a price equal to its customers' willingness to pay. When a firm is able to charge exactly what consumers are willing to pay, this is perfect price discrimination.

Which of the following is not an example of imperfect price discrimination? a) Disney allows kids under the age of 3 to enter theme parks for free. b) Ralph's Supermarket gladly accepts coupons in its stores. c) Spris Pizzeria offers a 30% discount to all dinner guests before 6:30pm. d) Sotheby's Auction House manages to sell paintings at a price equal to its customers' willingness to pay.

b) allows more consumers to purchase a certain good. In markets where price discrimination occurs, more people are allowed to purchase a certain good.

A benefit of price discrimination to consumers is that price discrimination: a) allows fewer consumers to purchase a certain good. b) allows more consumers to purchase a certain good. c) allows all consumers to buy a certain good at a lower price. d) increases deadweight loss.

b) Second-degree price discrimination Second-degree price discrimination occurs when a seller charges different customers different prices based upon the quantities they purchase.

Allied Ropes charges its customers $2 per foot of rope for the first 100 feet, $1.50 per foot for the second hundred feet, and $1 per foot for each additional foot above 200 feet. This is an example of which type of price discrimination? a) First-degree price discrimination b) Second-degree price discrimination c) Third-degree price discrimination d) Fourth-degree price discrimination

c) larger; more; less When a firm is able to charge exactly what consumers are willing to pay, this is perfect price discrimination.

Compared to a monopolist that does not price discriminate, a price discriminator will produce an output that is _____, capture _____ consumer surplus, and generate _____ deadweight loss in the market. a) smaller; less; more b) larger; more; more c) larger; more; less d) smaller; more; less

c) may lead to higher prices for some consumers, but it also improves efficiency by allowing more consumers to purchase the goods they desire, reducing deadweight loss. Some consumers with lower elasticities may pay higher prices, but those with higher elasticities may now have access to certain goods, which reduces deadweight loss.

Compared to a single-price monopolist, price discrimination: a) leads to higher prices for all consumers. b) leads to lower prices for all consumers, improving efficiency by allowing more consumers to purchase the goods they desire, reducing deadweight loss. c) may lead to higher prices for some consumers, but it also improves efficiency by allowing more consumers to purchase the goods they desire, reducing deadweight loss. d) leads to greater deadweight loss.

d) deadweight loss is lower. Price discrimination decreases deadweight loss as more consumers are able to purchase a certain good.

Compared to single-price monopoly markets, in monopoly markets with price discrimination: a) efficiency is the same. b) consumer surplus is greater. c) deadweight loss is higher. d) deadweight loss is lower.

c) earns higher profits. Compared to a single-price monopolist, a price-discriminating monopolist earns higher profits.

Compared with a single-price monopolist, a price-discriminating monopolist: a) earns the same profit. b) earns lower profits. c) earns higher profits. d) has lower costs.

d) imperfect price discrimination; increases

Going to the wholesale club, one can buy toothpaste at a lower cost per unit as long as one buys 6 tubes of toothpaste at once. This is an example of _____ and this _____ total producer surplus. a) perfect price discrimination; decreases b) perfect price discrimination; increases c) imperfect price discrimination; decreases d) imperfect price discrimination; increases

d) John is not practicing price discrimination. John is charging different prices for different products.

John, an artist who makes sculptures of bears from tree stumps, charges more for larger sculptures. This is an example of which type of price discrimination? a) First-degree price discrimination b) Second-degree price discrimination c) Third-degree price discrimination d) John is not practicing price discrimination.

a) willingness-to-pay. First-degree price discrimination, also known as perfect price discrimination, is based upon willingness-to-pay.

Perfect price discrimination requires that the price being charged is equal to: a) willingness-to-pay. b) marginal cost. c) total cost. d) willingness-to-sell

a) first-degree price discrimination. First-degree price discrimination is based upon willingness-to-pay. -Typically you charge higher price to group of inelastic demand and lower price to group of elastic demand. -To price discriminate is that they have to have some market power, and divide consumers to two different groups.

Price discrimination based upon an individual's willingness-to-pay is: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) fourth-degree price discrimination.

c) third-degree price discrimination. Third-degree price discrimination charges different groups of people different prices.

Price discrimination based upon charging different groups of people different prices is: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) fourth-degree price discrimination.

b) second-degree price discrimination. Second-degree price discrimination is based upon different levels of consumption.

Price discrimination based upon different levels of consumption is: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) fourth-degree price discrimination.

d) Utility industry Second-degree price discrimination, which involves charging different customers different prices based upon the quantities they purchase, often occurs in the utility industry.

Second-degree price discrimination is MOST likely to be used in which of the following industries? a) Automobile dealer industry b) Restaurant industry c) Airline industry d) Utility industry

c) producer surplus; less elastic

The goal of price discrimination is to increase _____ by charging more to those who have _____ demand. a) consumer surplus; less elastic b) consumer surplus; more elastic c) producer surplus; less elastic d) producer surplus; more elastic

c) more elastic demand

The movie theater in your neighborhood charges lower ticket prices to senior citizens than to other patrons. Assuming that this pricing strategy increases the profits of the movie theater, we can conclude that senior citizens must have a ________ for movie tickets than other patrons. a) greater demand b) lower demand c) more elastic demand d) less elastic demand

c) less than

The value of deadweight loss for a perfect price discriminator is _____ an imperfect price discriminator. a) greater than b) the same as c) less than d) unknown compared to

b) perfect price discrimination; zero

Tom is a junk remover who occasionally finds rare antiques to sell. He uses an online auction site to sell each antique for the highest possible price customers are willing to pay. Tom is engaging in _____, and this leads to _____ consumer surplus. a) perfect price discrimination; very high b) perfect price discrimination; zero c) imperfect price discrimination; very high d) imperfect price discrimination; zero