Micro Chapter 11

In a price discrimination setting, who pays the higher price for the same good? a. The consumers with the most inelastic demand pay the highest price. b. The consumers with the most elastic demand pay the highest price. c. All consumers pay the same high price. d. It is unknown which consumers would pay the higher price. e. The consumers with the most inelastic supply pay the highest price.

a. The consumers with the most inelastic demand pay the highest price.

Perfect price discrimination occurs when a firm is able to: a. charge each buyer the highest price she or he is willing to pay for the good. b. identify at least two different groups of buyers. c. determine the difference between a seller's reservation price and the buyer's reserve price. d. prevent frequent reselling of its product. e. determine the prices that should be charged to generate the largest amount of consumer surplus.

a. charge each buyer the highest price she or he is willing to pay for the good.

The main reason firms cannot price-discriminate under perfect competition is because: a. firms are price-takers and cannot set prices for their goods. b. firms cannot identify different kind of consumers perfectly. c. some goods are being resold in the market. d. there is a lot of heterogeneity among consumers' tastes. e. all firms share the same production technology.

a. firms are price-takers and cannot set prices for their goods.

For a firm to be able to practice price discrimination, it must be a: a. price-maker. b. cost producer. c. price practitioner. d. price-taker. e. profit maker.

a. price-maker.

Price discrimination allows businesses to make additional profits and allows markets to work more: a. equitably. b. efficiently. c. independently. d. realistically. e. unfairly.

b. efficiently.

Price discrimination can help improve efficiency in the market because goods are sold to more people, thus increasing profits. If all consumers have similar tastes, will a firm be able to price-discriminate? a. Yes, because the market is homogeneous2 b. Yes, as long as reselling is prohibited in the market c. No, because the firm will not be able to distinguish among groups of consumers d. No, because the similarities among consumers will lead to collusion among buyers e. Yes, because there will be a monopoly in the market (because all consumers want to purchase the same goods and services)

c. No, because the firm will not be able to distinguish among groups of consumers

If a firm is unable to distinguish which of their buyers has inelastic demand and which has a relatively elastic demand, then the firm will be unable to price discriminate because they will: a. not know how much of the product to offer for sale. b. not know enough about their customer base to prevent resale. c. not know which price to charge which customer. d. not know how many of their customers will buy the product when it is offered for sale. e. be unable to predict how much of their sales will be retained as profit.

c. not know which price to charge which customer.

Firms are most likely to engage in price discrimination if: a. the goods can be resold in the market without any loss in value or quality. b. the goods can be resold in the market, but there is a large loss in the value or quality of the product. c. the goods cannot be resold in the market. d. consumers all have a similar reservation price for the goods produced. e. consumers of all ages have similar preferences for the goods produced.

c. the goods cannot be resold in the market.

Price discrimination allows firms to make more money by partitioning their customers into at least two distinct groups, those that: a. the firm wants to retain as customers and those that will decide to buy elsewhere. b. have a similar elasticity of demand and those who are unaware of their demand elasticity. c. will get a discount and those that are willing to pay more. d. differ from their usual customer type and those with characteristics common to their customer base. e. are willing to pay more and those that are easily misled by discounts.

c. will get a discount and those that are willing to pay more.

When a market model moves from that of a monopoly to one in which perfect price discrimination is practiced, the deadweight loss: a. increases. b. remains unchanged. c. can increase or decrease depending on the type of loss. d. decreases. e. fluctuates.

d. decreases.

One reason that firms may be unable to utilize price discrimination as a viable strategy is because: a. it is always illegal to price-discriminate. b. firms are unwilling to maximize profits. c. most consumers' reservation prices are well publicized. d. firms are unable to prevent resale of the product they offer for sale. e. firms are unlikely to increase profits after paying for increased marketing costs.

d. firms are unable to prevent resale of the product they offer for sale.

Price discrimination exists when a firm sells __________ goods at more than one price to __________ groups of customers. a. different; similar b. existing; distinct c. discounted; large d. identical; different e. limited; restricted

d. identical; different