Question : 16.2   Price Discrimination: Charging Different Prices for the Same Product 1) : 1387937

16.2   Price Discrimination: Charging Different Prices for the Same Product

1) If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations, then it is engaging in

A) odd pricing.

B) cost-plus pricing.

C) price discrimination.

D) markup pricing.

2) Why is price discrimination legal but not discrimination based on race or gender? 

A) because price discrimination increases profits and therefore tax revenues for the government, but discrimination based on race or gender reduces tax revenues

B) because price discrimination reduces deadweight loss, but discrimination based on race or gender increases deadweight loss

C) because price discrimination involves charging people different prices based on their willingness to pay rather than on the basis of arbitrary characteristics

D) because price discrimination enables firms to increase output and employment, but race or gender based discrimination reduces employment

3) Firms price discriminate

A) to reduce the quantity sold so as to reduce production costs.

B) to increase profits.

C) to take advantage of customers.

D) to increase total economic surplus.

4) Toot Sweets Bakery sells freshly baked muffins from 6.30 am at $1.20 per muffins. By 4 pm, the remaining muffins are marked down to $0.60 each. Which of the following statements is true?

A) Toot Sweets engages in price discrimination; a higher price for those who cannot wait and a lower price for those willing to wait until 4 pm.

B) Toot Sweets is trying to prevent the opportunity to make arbitrage profit.

C) Toot Sweets is trying to minimize its loss.

D) Toot Sweets has underestimated the demand for its muffins.

5) Which of the following is not a way by which price discriminating firms can segment a market?

A) on the basis of time of purchase, for example long-distance calling

B) by requiring an advance purchase, for example air tickets

C) on basis of the buyer’s location, for example requiring out-of-state students to pay higher tuition

D) on the basis of the supplier’s marginal cost of production, for example requiring customers to pay a premium for customizing options

6) Which of the following products allows the seller to identify different groups of consumers (segment the market) at virtually no cost?

A) early bird dinner specials

B) books sold online

C) a pair of Bose speakers

D) iPhones

7) Which of the following are necessary condition(s) for successful price discrimination?

a.zero transaction cost

b.a perfectly competitive market structure

c.an imperfectly competitive market structure

d.at least two different markets with different price elasticities of demand

e.at least two different markets with different price elasticities of supply

A) a, b, and d only

B) c and d only

C) a, c, d and, e only

D) a and c only

8) Most movie theatres charge different prices to different groups of customers for movie admission but not on movie popcorn. Which of the following is a reason for this?

A) because the markup on movie popcorn is very high and movie theatres do not want to forego this source of revenue

B) because the demand for popcorn is very high relative to the demand for movie admissions

C) because it is easier to limit resale in movie admissions but not in popcorn

D) because the cost of operating a concession stand in a movie theatre is very high compared to the cost of showing a movie

9) Which of the following is a necessary condition for successful price discrimination?

A) The seller must possess market power.

B) The buyer must possess market power.

C) Transaction costs must be zero.

D) Buyers must have identical inelastic demands.

10) Successful price discrimination cannot take place if

A) the market is perfectly competitive.

B) the market can be segmented into different buyer groups.

C) customers are not able to resell the product.

D) the demand curve facing the firm is downward sloping.