Econ Final Chapter 14 Price Discrimination and Pricing Strategy

The difference between tying and bundling is that: bundled goods are sold one to one, while tied goods are sold one to many. bundling is more restrictive than tying. tying is more restrictive than bundling. bundled goods are sold one to many, while tied goods are sold one to one.

bundled goods are sold one to one, while tied goods are sold one to many.

Disneyland sells goods that are largely: separated. bundled. aggregated. tied.

bundled.

In which of the following industries may price discrimination be good? industries with high fixed costs of production Price discrimination is never good, as it lowers total surplus in society. industries with low marginal costs of production industries with poor consumers

industries with high fixed costs of production

Why are the prices of hardcover books more expensive than paperback? Unlike paperback books, hardcover books are generally exempt from state sales taxes. Consumers who can't wait for the paperback version have a greater willingness to pay and buy the hardback upon its release. Higher production costs accounts for the entire price difference. Hardcover books are of higher quality, and the difference in price reflects this.

Consumers who can't wait for the paperback version have a greater willingness to pay and buy the hardback upon its release.

Which of the following statements is TRUE? Customers who shop for airline tickets weeks or months in advance are likely vacation travelers and thus more sensitive to ticket prices. Customers who must purchase airline tickets for a flight tomorrow are likely business travelers and thus more sensitive to ticket prices. Customers who must purchase airline tickets for a flight tomorrow are likely business travelers and thus have more elastic demands. Customers who shop for airline tickets weeks or months in advance are likely business travelers and thus have inelastic demand.

Customers who shop for airline tickets weeks or months in advance are likely vacation travelers and thus more sensitive to ticket prices.

Haircuts for men are often cheaper than haircuts for women, even when they are offered by the same stylist. Why might this be price discrimination? Stylists are misogynists. The marginal cost of supplying a haircut may be lower for male than for female customers, and haircutting is a competitive industry with few fixed costs. Demand for haircuts for women might be more inelastic than demand for haircuts for men, and haircuts are impossible to arbitrage. Everyone has the same demand for haircuts.

Demand for haircuts for women might be more inelastic than demand for haircuts for men, and haircuts are impossible to arbitrage.

Arbitrage is the act of buying at a low price and selling at a high price, which makes the practice of price discrimination even more profitable. False True

False

Price discrimination is bad if total surplus increases with a decrease in output. True False

False

Which of the following best explains why people booking airline tickets just prior to their departure dates tend to pay a higher price than those that book a long time in advance? Individuals booking tickets just a few days in advance tend to be businessmen whose firms are paying for their tickets so they are not concerned about the price. Individuals booking tickets just a few days in advance tend to have a lower opportunity cost of their time. Individuals that book tickets a long time in advance tend to have a lower demand for airline tickets. Individuals booking tickets just a few days in advance tend to have a more inelastic demand for airline tickets.

Individuals booking tickets just a few days in advance tend to have a more inelastic demand for airline tickets.

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? It is much cheaper to produce the drug in Africa than in Europe. Lower prices were charged for humanitarian reasons. African governments imposed price ceilings. Government regulations in Europe forced it to charge higher prices.

Lower prices were charged for humanitarian reasons.

Which of the following regarding the outcome of perfect price discrimination is TRUE? Deadweight loss increases. Consumer surplus increases. The economy becomes more efficient. Producer surplus increases.

Producer surplus increases.

Airlines engage in price discrimination. False True

True

In markets where consumers are price insensitive, price discriminators should charge higher prices than in markets where consumers are price sensitive. False True

True

Perfect price discrimination results in zero dollars of consumer surplus. False True

True

er 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? marginal-price geography perfect price discrimination price gouging arbitrage

arbitrage

A firm that spends extra money to practice tying does so to: advertise. prevent competition. benefit customers. increase quality.

prevent competition.

Private universities such as Williams College price discriminate most directly by: time of enrollment. number of credit hours. family income level. year in school.

family income level.

Bundling can increase efficiency especially when: both fixed costs and marginal costs are low. both fixed costs and marginal costs are high. fixed costs are low and marginal costs are high. fixed costs are high and marginal costs are low.

fixed costs are high and marginal costs are low.

A perfectly price-discriminating monopoly causes: no social surplus. maximum social surplus. as much social surplus as in the case of a standard monopoly. as much social surplus as in the case of monopolistic competition.

maximum social surplus.

Universities practice price discrimination by: charging students with the same residency status different rates of tuition. requiring freshmen to live on campus. requiring each student take a set number of general education courses. offering students different levels of scholarship support.

offering students different levels of scholarship support.

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: price manipulation. international price mediation. price exploitation. price discrimination.

price discrimination.

Which of the following is NOT an example of price discrimination? product innovations leading to lower prices standby seats sold at the last minute by airlines peak and nonpeak rates for cell phone usage children's menus in restaurants

product innovations leading to lower prices

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: use fixed-cost pricing. sell only sports channels to the first type of viewers and sell only music channels to the second type of viewers. use "à la carte" pricing. sell sports and music channels in one bundle to both types of viewers.

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

Price discrimination can be defined as: selling different products to the same consumers in the same market. selling the same product at two different prices in two different markets. selling the same product in two different markets. exporting goods to foreign countries.

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

Which of the following does NOT represent a benefit that can be achieved from bundling? setting of bundle prices that are lower than individual unit prices spreading of fixed costs across greater number of units increased incentive to innovate increased profit

setting of bundle prices that are lower than individual unit prices