ECON MOD 8

For a firm with a​ peak-period followed by an​ off-peak period, in the​ peak-period the equilibrium quantity​ ____ the capacity quantity. A. equals B. might be equal​ to, greater​ than, or less than C. is greater than D. is less than

A

If a firm faces a​ high-demand period​ (a peak-period) followed by a​ low-demand period​ (an off-peak​ period), the​ firm's capacity depends on A. the​ high-demand period and not the​ low-demand period. B. the sum of the​ high-demand plus the​ low-demand. C. the​ low-demand period and not the​ high-demand period. D. the difference between the​ high-demand and​ low-demand.

A

In peak−load ​pricing, the capacity decision is determined by setting​ ________ marginal revenue equal to long−run ​________ cost. A. peak; marginal B. off−​peak; marginal C. peak; average fixed D. off−​peak; average fixed

A

Managers using​ third-degree price discrimination A. charge different prices to different customers for the same unit of the product. B. charge a single customer different prices for different units of the product. C. charge every customer the highest price they are willing to pay for each unit of the product they buy. D. None of the above are correct.

A

Sled dogs in Alaska must be fed​ year-round. They are generally fed​ USDA-inspected ground​ beef, identical to that sold for human consumption. Meat producers often add activated charcoal to the ground beef destined for dogs. The activated charcoal is harmless but makes the meat significantly less appealing for humans. Activated charcoal is not​ free, but the price of meat for dogs is less than the price of meat for humans. Why do meat producers add charcoal to meat intended for dog food and then sell it at a lower​ price? A. The meat producers are using​ third-degree price discrimination by selling at different prices to two groups of​ consumers, and they add charcoal to prevent arbitrage. B. The meat producers are using​ first-degree price​ discrimination, and they add charcoal so that they can maintain their market power by offering a differentiated product. C. The meat producers are using​ first-degree price​ discrimination, and they add charcoal so the customers pay the maximum amount they are willing to pay for each kind of meat. D. The meat producers are using​ second-degree price​ discrimination, and they add charcoal so the customers pay more for the first unit of meat intended for them and less for subsequent units intended for dogs.

A

A firm that faces a high−demand period followed by a low−demand period must determine all of the following for peak−load pricing except which​ one? A. short−term peak quantity B. long−term off−peak price C. short−term peak price D. short−term off−peak quantity

B

Airlines often charge customers who buy their ticket several weeks in advance of the flight a lower price than customers who buy their tickets a day or two before the flight. Airlines offer this lower price to customers who buy their tickets well in advance generally A. have a smaller price elasticity of demand than customers who buy closer to the flight. B. have a larger price elasticity of demand than customers who buy closer to the flight. C. are less likely to use their ticket. D. have a lower marginal cost than customers who buy closer to the flight.

B

An example of commodity bundling is A. Amazon suggesting to customers that they buy sound bars when the customers add an expensive television to their shopping cart. B. the King and Prince resort on St.​ Simon's island offering a golf package that includes an overnight stay at the resort and a round of golf. C. Walgreen's offer to sell one box of Tide detergent at full price and the second box at 50 percent off. D. the different sized boxes of popcorn that Regal Cinemas sells to its customers.

B

Compared to a​ single-price monopoly, a firm using​ first-degree price discrimination​ ____ consumer surplus and​ ____ the​ firm's economic profit. A. increases; increases B. decreases; increases C. decreases; decreases D. increases; decreases

B

Fast Technology sells its computers and monitors​ separately, but also sells them as a package. This is an example of​ ________. A. two−part pricing B. mixed bundling C. pure bundling D. an all−or−nothing offer

B

Fast​ Stop, a gasoline and grocery quick​ mart, charges​ $2 for a 20 ounce fountain drink and​ $3 for a 40 ounce fountain drink. This is an example of​ ________. A.third−degree price discrimination B. second−degree price discrimination C. an all−or−nothing offer D. two−part pricing

B

If Health Spas charges an annual membership fee of​ $1,000 for the use of their facilities and charges a​ $20 fee each time a member uses their​ facilities, the​ $1,000 charge is​ a(n) ________ fee and the​ $20 charge is​ a(n) ________ fee. A. user; user B. fixed; user C. fixed; fixed D. user; fixed

B

To maximize overall profit in peak−load ​pricing, managers must determine​ ________ capacity that maximizes​ ________ season profit. A. short−​run; peak− B. long−​run; peak− C. short−​run; off−peak D. long−​run; off−peak

B

A firm charges​ $450 for a​ one-way ticket to Atlanta on a flight leaving at​ 6:00 a.m.​ But, the price of a​ 9:30 a.m. flight is​ $600. Is this difference price​ discrimination? A. This difference is not price discrimination as the demand for​ mid-morning flights is more elastic than the demand for early morning flights. B. This difference is not price discrimination as the firm incurs a higher marginal cost for its​ mid-morning flights than its early morning flights. C. This difference is price discrimination as the firm is charging different prices to different groups based on their preference for early morning or​ mid-morning flights. Your answer is correct. D. This difference is price discrimination as the firm is charging each of its customers based on which group of flight goers they belong to​ - early morning or​ mid-morning flight goers.

C

Athens, Georgia is the home of the University of Georgia. Its football​ team, the Georgia​ Bulldogs, is a perennial​ powerhouse, and home games are virtually always sold out. The Graduate Athens is a wonderfully eclectic Athens hotel. Suppose that a weekend stay in a king suite at a similar hotel is​ $639, with a​ two-night stay​ required, when the Bulldogs are playing at home but is only​ $329, with no​ two-night stay​ required, on weekends without home football games. Is this price difference​ peak-load pricing? Explain your answer. A. This price difference is not​ peak-load pricing. The hotel faces its period of peak demand during home football​ games, and it sets the highest price during this time. B. This price difference is​ peak-load pricing. The hotel faces its period of peak demand during home football​ games, and it sets the​ off-peak price during this time. C. This price difference is​ peak-load pricing. The hotel faces its period of peak demand during home football​ games, and it sets the highest price during this time. D. This price difference is not​ peak-load pricing. The hotel faces its period of peak demand during home football​ games, and it sets the​ off-peak price during this time.

C

If Big​ Fitness, a large workout​ facility, offers a discounted membership to college​ students, this is an example of​ ________. A. second−degree price discrimination B. first−degree price discrimination C. third−degree price discrimination D. zero−degree price discrimination

C

If Good Tissue sells its toilet paper only in packages of six​ rolls, this is an example of​ ________. A. linear pricing B. commodity bundling C. an all−or−nothing offer D. two−part pricing

C

Of the three types of price−​discrimination, which yields the greatest profits to the​ firm? A. zero−degree price discrimination B. second−degree price discrimination C. first−degree price discrimination D. third−degree price discrimination

C

To practice third−degree price​ discrimination, each of these market conditions must be met except which​ one? A. The firm must have market power. B. The firm must be able to determine in which group each customer belongs. C. All consumers must have the same own price elasticity of demand. D. No arbitrage opportunities can exist between customer groups.

C

What role does consumer surplus play in the profitability of price​ discrimination? A. Price discrimination is only profitable when the economic profit of the​ firm(s) exceeds consumer surplus. B. Price discrimination is only profitable when there is no additional consumer surplus that can be converted to profit. C. Price discrimination is only profitable when there is additional consumer surplus that can be converted to profit. D. Price discrimination is profitable regardless of whether there exists any additional consumer surplus that can be converted to profit.

C

For a firm with a​ peak-period followed by an​ off-peak period, the​ peak-period equilibrium quantity is​ ____ than the​ off-peak period equilibrium quantity and the​peak-period price is​ ____ than the​ off-peak period price. A. less; less B. less; higher C. greater; less D. greater; higher

D

If Big Pools charges an annual membership fee of​ $500 per person for the use of their pool and charges a​ $4 fee each time a member uses the​ pool, this is an example of​ ________. A. an all−or−nothing offer B. commodity bundling C. a single pricing scheme D. two−part pricing

D

If Happy Babies sells its baby formula in the United States for 30 percent less than it does in​ Canada, this is an example of​ ________. A. peak−load pricing B. second−degree price discrimination C. two−part pricing D. third−degree price discrimination

D

If a firm is able to practice first−degree price​ discrimination, the firm will produce​ ________ than if they charged a single price to all consumers and the firm will earn​________ profit than if they charged a single price to all consumers. A. less; less B. more; less C. less; more D. more; more

D

If​ Mario's Pizza offers consumers who purchase one medium sized pizza a second pizza at half​ price, this is an example of​ ________. A. third−degree price discrimination B. zero−degree price discrimination C. first−degree price discrimination D. second−degree price discrimination

D

In peak−load ​pricing, the off−peak profit−maximizing quantity is​ ________ than the profit−maximizing quantity during the peak period and the profit−maximizing price during the off−peak period is​ ________ than the profit−maximizing price during the peak period. A. more; less B. less; more C. more; more D. less; less

D

In third−degree price​ discrimination, markets with a smaller price elasticity of demand are​ ________ responsive to price changes and are charged​ ________ prices than markets with a larger price elasticity of demand. A. more; lower B. less; lower C. more; higher D. less; higher

D

Why is the​ off-peak price unaffected by the marginal cost of expanding​ capacity? A. The​ off-peak demand determines capacity. During the​ off-peak period, the marginal cost of expanding capacity is irrelevant as the capacity is exactly equal to the demand. B. The peak demand determines capacity. During the​ off-peak period, the marginal cost of expanding capacity is irrelevant as it always exceeds the​ off-peak price. C. The​ off-peak demand determines capacity. During the​ off-peak period, the marginal cost of expanding capacity is irrelevant as the​ off-peak price is determined by the average total cost. D. The peak demand determines capacity. During the​ off-peak period, the marginal cost of expanding capacity is irrelevant as there is excess capacity.

D

​Two-part pricing requires consumers to A. pay a low price in the​ off-peak period and a high price in the peak period. B. buy more than one unit of the product. C. pay different prices for different units of the product. D. pay a fixed fee to access the product and also a seperate​ per-unit price for each unit purchased.

D

A movie theater sells tickets to both adults and students. If the demand from adults is the same as that from​ students, the movie theater will be able to increase its profit by using​ third-degree price discrimination. T or F?

F