Question

Question 17 (1 point)

Price discrimination is used when a seller faces different demand curves in different markets because:

Question 17 options:

	profits are less than when selling at monopoly prices.
	no other pricing methods are feasible.
	profits are greater than selling at a single price.
	the practice eliminated waste.

Question 18 (1 point)

Why is it important for firms practicing price discrimination to prevent arbitrage of their product?

Question 18 options:

	Arbitrage is unrelated to firms' profits since the products are still being sold.
	Smugglers alter product quality as they pass from market to market, hence harming the reputation and future profits of firms.
	Arbitrage reduces the profits from price discrimination for firms, and increases profits for smugglers.
	Arbitrage increases deadweight loss in the market.

Question 19 (1 point)

One would expect more arbitrage to occur between two markets if:

Question 19 options:

	the products have built in tracking mechanisms that enable the discovery of the distributors.
	the demand curves in the two markets are essentially the same.
	products are non-differentiated and the different markets have good transportation networks between them.
	the products are differentiated in terms of their fundamental characteristics.

Question 20 (1 point)

Pharmaceuticals with high fixed costs can benefit with the practice of price discrimination because:

Question 20 options:

	profit from customers paying high prices allows pharmaceuticals to cover part of the fixed costs.
	as long as customers paying low prices are paying more than marginal cost, the additional revenue from these customers helps cover the fixed costs.
	high costs are an incentive for pharmaceuticals to sell more.
	charging different prices to different customers generates different levels of fixed costs.

Question 21 (1 point)

Tying is:

Question 21 options:

	the practice of a firm selling one product that requires the consumer to purchase another of the firm's products.
	the practice of buying one unit at full price and the second unit at half off.
	the same thing as buy one get one free.
	the practice of a firm's paying the sales tax in exchange for a consumer's purchase of an extended warranty.

Question 22 (1 point)

The Gillette Fusion razor sells for approximately $10.00, and a four-set of replacement blades sells for over $8. Which of the following statements is TRUE?
I. Consumers with a high willingness to pay for being clean-shaven will buy many replacement blades.
II. Consumers with a low willingness to pay for being clean-shaven will rarely buy replacement blades.
III. Gillette's high price for the replacement blades is a method to extract consumer surplus from those consumers with a high desire to be clean shaven.

Question 22 options:

	I and II only
	II and III only
	III only
	I, II, and III

Question 23 (1 point)

In order for a firm to successfully use tying:

Question 23 options:

	the firm must sell the base good for 50 percent more than the second good.
	the firm must sell the base good at a lower price than the second good.
	the firm must charge the same price for the base good and the second good.
	it must be difficult for other firms to sell the second good.

Question 24 (1 point)

Bundling and tying are:

Question 24 options:

	essentially the same practices.
	considered illegal in many countries.
	different forms of price discrimination.
	often done at the same time.

Question 25 (1 point)

The more a firm knows about ________ the easier it is for the firm to ________.

Question 25 options:

	competitors; advertise
	supply; price discriminate
	costs; sell its goods
	demand; price discriminate

Answer 1

Q17) option 3)

Profits are greater with DISCRIMINATION than with single price case

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18) option 3)

Arbitrage reduce profits for Firms

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19) option 3)

Products are non differented with good transport network system

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20)option 1)

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21) option 1)

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22) option 3)

Only III is true

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23) option 2)

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24) option 3)

These are Different forms of price DISCRIMINATION

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25) option 4)

Demand, price discriminate

For price DISCRIMINATION, Firm should know about Demand Curves