A mail-order clothing company offers a discount if customers purchase two shirts instead of only one. This is necessarily an example of quantity discrimination. Indicate whether the statement is true or false ANSWER False. The shipping cost per item is less for two shirts than for one. This cost difference may explain the discount. […]
What is one reason suppliers might offer a discount for quantity purchases? A) reduced storage costs B) lower marginal cost C) lower marginal benefit D) price gouging ANSWER A
After analyzing his opponent, a tennis player decides to serve 10% of his serves to the left, 50% of his serves to the right, and 40% of his serves at the body of his opponent. This illustrates a A) deterministic strategy. B) dominant strategy. C) mixed strategy. D) non-game theoretic problem. ANSWER C
If you purchase one pound of apples the price is $1.50 per pound. If you buy a five pound bag of apples, the cost is $5.00. This is most likely an example of A) quantity discounts. B) lower marginal cost. C) lower marginal benefit. D) price gouging. ANSWER A
If firms that practice second degree price discrimination use more block prices, A) both consumer surplus and welfare will decrease. B) both consumer surplus and welfare will increase. C) consumer surplus will decrease, but welfare will increase. D) consumer surplus will increase, but welfare will decrease. ANSWER C
A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm. Those who check in early are much more likely to use the hotel’s pool. Explain why this price difference may not be price discrimination. What will be an ideal response? ANSWER The […]
Price discrimination reveals A) the inherent greed of Western culture. B) the inability for regulators to stop unethical practices. C) that individuals have different willingness to pay. D) that individuals have the same willingness to pay. ANSWER C
While price discrimination is possible between two markets, it is not possible in more than two. Indicate whether the statement is true or false ANSWER False. The number of markets does not matter. All that is required is that markets differ in their respective price elasticity of demand.
If a firm offers a senior citizen discount, A) the firm expects the average senior citizen to have a lower price elasticity of demand. B) the firm expects the average senior citizen to have a higher price elasticity of demand. C) senior citizens may be offended. D) it may be prosecuted for discrimination. ANSWER […]
Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA = 10 – QA, and the inverse demand curve for group B is PB = 18 – QB. The monopolist is able to produce the good […]
