Exam 14: Price Discrimination

A) base good; variable good
B) physical; service good
C) physical good; nonphysical good
D) mother good; spawned good

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A) Disneyland selling many attractions for a single entrance fee
B) the buffet at China Garden
C) cable TV offering multiple channels to its customers.
D) HP selling printers and ink cartridges

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A) P = MC.
B) MR = MC.
C) P = MR.
D) MR = AC.

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If the monopolist price discriminates, i...

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A) I and II only
B) II only
C) III only
D) I and III only

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A) If the firm can perfectly price discriminate it can charge a price equal to the consumers' willingness to pay, which for all units beyond c is higher than the firm's marginal cost for those units.
B) The firm will continue to increase profits as long as consumers' willingness to pay is greater than zero.
C) A firm will not sell beyond c units of output. The marginal cost is greater than consumers' willingness to pay for these units.
D) A firm will not sell beyond c units of output. The marginal cost is greater than the firm's marginal revenue for these units.

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A) tied
B) bundled
C) aggregated
D) separated

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A) Everyone has the same demand for haircuts.
B) The marginal cost of supplying a haircut may be lower for male than for female customers, and haircutting is a competitive industry with few fixed costs.
C) Stylists are misogynists.
D) Demand for haircuts for women might be more inelastic than demand for haircuts for men, and haircuts are impossible to arbitrage.

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A) The firm must have very good information about its customers.
B) The firm can only have one market.
C) The demand curve for the product must be inelastic.
D) The firm must have no competition.

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A) Haircuts are harder to resell.
B) There are more substitutes for shampoo.
C) Haircuts are a bundle of goods: location of the salon, quality of the stylist, etc.
D) There is less competition for selling shampoo.

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A) markets are segmented and each segment is charged a markup inversely proportional to the elasticity of demand.
B) each customer is charged the average price that others with his or her characteristics are willing to pay.
C) each customer is charged his or her maximum willingness to pay.
D) it is easy to arbitrage.

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A) they both are strategies that firms use to maximize profit.
B) tying does not require the purchase of both goods, but bundling does.
C) tying involves the combination of goods that are complements, whereas bundling involves the combination of substitutes.
D) tying does not lead to as much profit as bundling does.

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A) using age of customers
B) releasing different versions of a product over time
C) relying on the self-reported marital status of customers
D) using characteristics that are correlated with a consumer's willingness to pay

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A) I only
B) II and III only
C) I and III only
D) I and II only

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A) more elastic
B) unit elastic
C) more inelastic
D) weaker

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A) This occurs when a seller charges each separate consumer an amount that is exactly equal to his or her maximum willingness to pay.
B) This occurs when a seller is able to charge two different prices in different markets.
C) This occurs when consumer surplus is maximized in a given market.
D) All of the answers are correct.

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