Question : 51) Consider the following pricing strategies: a.perfect price discrimination b.charging different prices : 1387942

51) Consider the following pricing strategies:

a.perfect price discrimination

b.charging different prices to different groups of customers

c.optimal two-part tariff

d.single-price monopoly pricing

Which of the pricing strategies leads to the economically efficient output level?

A) a only

B) a and b only

C) a and c only

D) a, b, and c only

52) If Mort’s House of Flowers sells one dozen roses to different customers at different prices, economists would consider this an example of

A) price gouging.

B) rational ignorance.

C) arbitrage.

D) price discrimination.

53) Price discrimination is the practice of

A) charging different prices for the same good when the price differences are not due to differences in cost.

B) charging different prices for the same good when the price differences arise because of differences in cost.

C) charging different prices for different qualities of a product.

D) charging higher prices for brand named goods and lower prices for generic versions of the goods.

54) Which of the following is necessary in order for a firm to successfully practice price discrimination?

A) The firm must practice product differentiation.

B) The demand for the firm’s product is inelastic.

C) The firm must be able to segment the market for the product.

D) The firm’s transactions costs must be zero.

55) Arnold Marion, a first-year economics student at Fazer College, was given an assignment to find an example of price discrimination and present it to his class. When asked for his example Arnold said “I went to a Milwaukee Brewers baseball game with my cousin last week. We paid $25 each for our seats in left field. My aunt and uncle paid $50 each for their tickets; they sat five rows behind the first base dugout. This is an example of price discrimination since we paid different prices for the same product, and the differences were not due to differences in costs.” How would Arnold’s economics instructor assess Arnold’s example?

A) He would agree with Arnold that he had found an example of price discrimination, but would add that arbitrage would occur if ticket scalpers sold Brewers tickets for more than the prices Arnold and his uncle paid.

B) He would disagree with Arnold’s example because the $25 seats and the $50 seats were not the same products.

C) He would agree with Arnold that he had found an example of price discrimination and would explain that the elasticity of demand for Brewers tickets is different for Arnold and his uncle.

D) He would disagree with Arnold’s example because there were differences in transactions costs for the $50 tickets and the $25 tickets.

56) Which of the following is not a requirement for a successful price discrimination strategy?

A) A firm must have the ability to charge a price greater than marginal cost.

B) Some consumers must have a greater willingness to pay for the product than other consumers, and the firm must be able to know what prices consumers are willing to pay.

C) The firm must be able to prevent arbitrage.

D) Transactions costs must be the same for all consumers.

57) Which of the following is not a requirement for a successful price discrimination strategy?

A) A firm must have market power.

B) The firm must be able to prevent consumers who buy a product at a low price from reselling it to other consumers at a high price.

C) Managers must practice yield management.

D) Some consumers must have greater willingness to pay for the product than other consumers, and the firm must be able to know what prices consumers are willing to pay.

58) Which of the following is a reason why a firm would not engage in price discrimination?

A) Price discrimination is illegal in some western states and the owners of firms in these states face civil or criminal prosecution if they engage in price discrimination.

B) Some firms are not able to segment the market for the products they sell.

C) Some firms do not want to violate the law of one price.

D) The transactions costs associated with selling the product exceed the price of the product.

59) Insurance companies typically charge women lower prices than men for automobile insurance. Is this an example of price discrimination?

A) No, because, on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women.

B) Yes, because the costs of selling insurance to men and women are the same.

C) Yes, because insurance companies can prevent arbitrage; that is, women cannot transfer their insurance coverage to men.

D) No, because there are too many insurance companies for any one company to have market power. A firm must possess market power in order to practice price discrimination.

60) Price discrimination is a rational strategy for a profit-maximizing firm when

A) it is possible to engage in arbitrage across market segments.

B) it is not possible to segment consumers into identifiable markets.

C) there is no opportunity for arbitrage across market segments.

D) firms want to increase the amount of consumer surplus received by its customers.