What is one reason car dealerships might move away from perfect price discrimination to uniform pricing? A) Perfect price discrimination doesn’t work. B) Transaction costs erode the profit of perfect price discrimination. C) Consumers are ill-informed and tend to complain too much. D) Uniform pricing is always more profitable and more fair as well. […]
Which of the following helps a monopoly perfectly price discriminate? A) unit demand by each consumer B) the product is perishable C) the product is personalizable D) All of the above. ANSWER D
If the price of business broadband is greater than that of residential broadband, all else equal, A) business has greater price elasticity than residential. B) residential has greater price elasticity than business. C) both have positive income elasticity. D) generally speaking, broadband is equally priced. ANSWER B
A group price discriminator sells its product in Florida for three times the price it sets in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0, the demand in Florida A) has an elasticity of -6.0. B) is more […]
Suppose a monopoly’s inverse demand curve is P = 100 -Q, it produces a product with a constant marginal cost of 20, and it has no fixed costs. How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing? A) The deadweight loss […]
Assume a firm organizes all individuals by their willingness to pay (least to most). If the firm starts to perfectly price discriminate, what is likely to happen? A) Consumers start to arbitrage amongst themselves. B) The firm’s profits will be maximized. C) The firm’s costs will be minimized. D) The firm starts to arbitrage with […]
Assume you have four tickets to a U2 concert. You decide to sell each of them separately on an auction site such as eBay. Your auctions represent A) price differentiation. B) perfect price discrimination amongst those who bid for your tickets. C) perfect price discrimination amongst all people who buy tickets for the concert. D) […]
Suppose group price discrimination is possible; however, a firm sets the same price in each market. As a result, A) price elasticity of demand is the same in each market. B) the price-inelastic market will buy zero units. C) marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market. D) […]
Suppose a firm uses the following price strategy for every customer. The first two units purchased cost $4 each, and any extra unit costs $3.50. What kind of price discrimination is this? A) First-degree price discrimination B) Group price discrimination. C) Non-uniform pricing. D) Uniform pricing. ANSWER C
If consumers are identical, then A) price discrimination is impossible. B) price discrimination can occur if each consumer has a downward-sloping demand curve for the product. C) perfect price discrimination is the only form of price discrimination that can increase a monopoly’s profit. D) tie-in sales cannot increase a monopoly’s profit. ANSWER B
