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 […]
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 […]
If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel, A) airlines would charge the same price to each type of flyer. B) airlines would still charge business flyers a higher fare since the traveler’s employer pays anyway. C) airlines […]
A weapons producer sells guns to two countries that are at war with each other. The guns can be produced at a constant marginal cost of $10. The demand for guns from the two countries can be represented as: QA = 100 – 2p QB = 80 – 4p Why is the weapons producer able […]
