Monopoly 3821
57.
Refer to Scenario 15-4. The profit–maximizing monopolist will earn profits of
a. $6,400.
b. $3,200.
c. $1,600.
d. $800.
58.
Refer to Scenario 15-4. The profit-maximizing monopolist will have a deadweight loss of
a. $6,400.
b. $3,200.
c. $1,600.
d. $800.
3822 Monopoly
Multiple Choice – Section 04: Price Discrimination
1.
Price discrimination
a.
is illegal in the United States and Europe.
b.
can occur in both perfectly competitive and monopoly markets.
c.
is illogical because it does not maximize profits.
d.
can maximize profits if the seller can prevent the resale of goods between customers.
2.
Price discrimination is the business practice of
a.
bundling related products to increase total sales.
b.
selling the same good at different prices to different customers.
c.
pricing above marginal cost.
d.
hiring marketing experts to increase consumers’ brand loyalty.
3.
When a monopolist is able to sell its product at different prices, it is engaging in
a.
distribution pricing.
b.
quality-adjusted pricing.
c.
arbitrage.
d.
price discrimination.
4.
The practice of selling the same goods to different customers at different prices, but with the same
marginal cost, is
known as
a.
price segregation.
b.
price discrimination.
c.
arbitrage.
d.
monopoly pricing.
5.
For a firm to price discriminate,
a.
it must be a natural monopoly.
b.
it must be regulated by the government.
c.
it must have some market power.
d.
consumers must tell the firm what they are willing to pay for the product.
6.
A rational pricing strategy for a profit-maximizing monopolist is
a.
price discrimination.
b.
price segregation.
c.
synergy pricing.
d.
average cost pricing.
7.
Price discrimination requires the firm to
a.
separate customers according to their willingnesses to pay.
b.
differentiate between different units of its product.
c.
engage in arbitrage.
d.
use coupons.
8.
Which of the following can eliminate the inefficiency inherent in monopoly pricing?
a.
arbitrage
b.
cost-plus pricing
c.
price discrimination
d.
regulations that force monopolies to reduce their levels of output
9.
A firm cannot price discriminate if it
a.
has perfect information about consumer demand.
b.
operates in a competitive market.
c.
faces a downward-sloping demand curve.
d.
is regulated by the government.
10.
A firm cannot price discriminate if
a.
its has declining marginal revenue.
b.
it operates in a competitive market.
c.
buyers only reveal the price they are willing to pay for the product.
d.
it has a constant marginal cost.
11.
Price discrimination adds to social welfare in the form of
(i)
increased total surplus.
(ii)
reduced costs of production.
(iii)
increased consumer surplus.
a.
(i) only
b.
(i) and (ii) only
c.
(i) and (iii) only
d.
(i), (ii), and (iii)
12.
Compared to the monopoly outcome with a single price, imperfect price discrimination
(i)
sometimes raises total surplus.
(ii)
sometimes lowers total surplus.
(iii)
always leads to a lower quantity of output.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(i), (ii), and (iii)
13.
Price discrimination
a.
forces monopolies to charge a lower price as a result of government regulation.
b.
is an attempt by a monopoly to prevent some customers from purchasing its product by
charging a high price.
c.
is an attempt by a monopoly to increases its profit by selling the same good to different
customers at
different prices.
d.
increases the consumer surplus associated with a monopolistic market.
14.
What do economists call the business practice of selling the same good at difference prices to
different customers?
a.
price discrimination
b.
collusion
c.
compensating differential
d.
Both a and b are correct
15.
A monopolist’s profits with price discrimination will be
a.
lower than if the firm charged a single, profit-maximizing price
b.
the same as if the firm charged a single, profit-maximizing price.
c.
higher than if the firm charged just one price because the firm will capture more consumer
surplus.
d.
higher than if the firm charged a single price because the costs of selling the good will be
lower.
16.
Which of the following is not an example of price discrimination?
a.
A movie theater charges a lower price for a child’s ticket than for an adult’s ticket.
b.
A university rebates part of the cost of tuition in the form of financial aid for needy students.
c.
A local pizza chain offers a “buy three get one free” deal.
d.
An ice cream parlor charges a higher price for ice cream than for sherbet.
17.
A movie theater can increase its profits through price discrimination by charging a higher price to
adults and a
lower price to children if it
a.
can prevent children from buying the lower-priced tickets and selling them to adults.
b.
has some degree of monopoly pricing power.
c.
can easily distinguish between the two groups of customers.
d.
All of the above are correct.
18.
A movie theater can increase its profits through price discrimination by charging a higher price to
adults and a
lower price to children if
a.
adults buy more popcorn than children.
b.
the cost of showing a movie to children is less than the cost of showing a movie to adults.
c.
it has some degree of monopoly-pricing power.
d.
All of the above are correct.
19.
Financial aid to college students, quantity discounts, and senior citizen discounts are all examples
of
a.
consumer surplus.
b.
deadweight loss.
c.
price discrimination.
d.
nonprofit pricing strategies.
20.
When deciding what price to charge consumers, the monopolist may choose to charge them
different prices based
on the customers’
a.
geographical location.
b.
age.
c.
income.
d.
All of the above are correct.
21.
Many movie theaters allow discount tickets to be sold to senior citizens because
a.
senior-citizen laws mandate such discounts.
b.
goodwill efforts earn community respect and win loyal patrons.
c.
the theaters are profit maximizers.
d.
senior citizens lobby city councils for lower prices.
22.
Round-trip airline tickets are usually cheaper if you stay over a Saturday night before you fly
back. What is the
reason for this price discrepancy?
a.
Airlines are practicing imperfect price discrimination to raise their profits.
b.
Airlines charge a different rate based on the different nature of peoples’ travel needs.
c.
Airlines are attempting to charge people based on their willingness to pay.
d.
All of the above are correct.
23.
When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to
a.
reduce prices for all customers.
b.
encourage literacy.
c.
encourage arbitrage.
d.
price discriminate.
24.
Price discrimination explains why Ivy League universities often base tuition costs on students‘
a.
age.
b.
financial resources.
c.
high school GPA.
d.
gender.
25.
Some prescription drugs sell for more in the United States than they do in other countries. Which
of the following
statements about this issue is most likely to be true?
a.
Drug companies are engaging in price discrimination, and this practice certainly reduces global
social
welfare.
b.
Global social welfare could be improved if the price in the United States were reduced to the
price charged
in other countries.
c.
Global social welfare could be improved if the price in the other countries were increased to the
price
charged in the United States.
d.
Drug companies are engaging in price discrimination, but this might improve global social
welfare if it gives
more people access to the drugs.
26.
Which of the following is not an example of price discrimination by a firm?
a.
children’s meals at a restaurant
b.
a natural gas company charging customers a higher rate in the winter than in the summer
c.
a senior citizens‘ discount
d.
coupons in the Sunday newspaper
27.
Customers who purchase an audio CD from Sally’s Sounds are charged 20% more than
customers who purchase
the audio CD from the Sally’s Sounds website. This is an example of
a.
perfect price discrimination.
b.
price discrimination.
c.
deadweight loss.
d.
socially inefficient output.
28.
During the holiday season, high–end retailers frequently place a high price on merchandise on
weekends and
discount the price during the week. They do this because they believe that two
groups of customers exist: shoppers
with little free time and bargain hunters. Bargain hunters have
time to shop around and frequently shop during the
week. What do economists call this price
strategy used by high-end retailers?
a.
oligopoly
b.
price discrimination
c.
compensating differential
d.
in-kind transfers
29.
Which of the following is an example of price discrimination?
a.
Nabisco provides cents-off coupons for its products.
b.
Amtrak offers a lower price for weekend travel compared to weekday rates on the same
routes.
c.
Hotel rates for AAA members are lower than for nonmembers.
d.
All of the above are correct.
30.
Which of the following is an example of price discrimination?
a.
An online bookstore charges more for overnight shipping than standard shipping when
customers buy books
from it.
b.
Airline tickets are more expensive for first-class seats than for coach.
c.
Hotel rates for AAA members are lower than for nonmembers.
d.
All of the above are correct.
31.
Which of the following statements comparing monopoly with competition is correct?
a.
A monopolist produces a higher level of output and charges a lower price than a competitive
firm would.
b.
With perfect price discrimination, the total surplus under monopoly can be the same as under
competition.
c.
With or without price discrimination, the consumer surplus under monopoly is at least as large
as it would be
under competition.
d.
The deadweight loss associated with monopoly is caused by the positive economic profits of the
monopolist;
competitive firms do not earn a positive economic profit so there is no deadweight
loss under competition.
32.
Suppose a monopolist is able to charge each customer a price equal to that customer’s
willingness-to-pay for the product. Then the monopolist is engaging in
a.
marginal cost pricing.
b.
arbitrage pricing.
c.
voodoo economics.
d.
perfect price discrimination.
33.
Suppose that a professional photographer takes a prize-winning digital photo. She can sell a 5″x7″
color print of the
photo for $10. She can also sell the digital file for $20. There are 500 people
willing to buy the color print and 2,000
people willing to buy the digital file. Assume the costs to
the photographer are zero and that the people who
purchase the digital file cannot resell the file
itself or any prints made from it. What should she do in order to
maximize her profits?
a.
earn $5,000 by selling only the color prints
b.
earn $40,000 by selling only the digital files
c.
earn $45,000 by selling both the color prints and the digital files at their respective prices
d.
We do not have enough information with which to answer this question.
Scenario 15-5
An airline knows that there are two types of travelers: business travelers and vacationers. For a
particular flight,
there are 100 business travelers who will pay $600 for a ticket while there are 50
vacationers who will pay $300 for
a ticket. There are 150 seats available on the plane. Suppose the
cost to the airline of providing the flight is $20,000,
which includes the cost of the pilots, flight
attendants, fuel, etc.
34.
Refer to Scenario 15–5. How much profit will the airline earn if it sets the price of each ticket at
$600?
a. –$5,000
b. $15,000
c. $40,000
d. $60,000
35.
Refer to Scenario 15–5. How much profit will the airline earn if it sets the price of each ticket
at $300?
a. -$15,000
b. -$5,000
c. $25,000
d. $45,000
36.
Refer to Scenario 15-5. How much profit will the airline earn if it engages in price
discrimination?
a. –$5,000
b. $40,000
c. $55,000
d. $75,000
37.
Refer to Scenario 15–5. How much additional profit can the airline earn by charging each
customer their
willingness to pay relative to charging a flat price of $600 per ticket?
a. $15,000
b. $25,000
c. $40,000
d. $70,000
38.
Refer to Scenario 15–5. How much additional profit can the airline earn by charging each
customer their
willingness to pay relative to charging a flat price of $300 per ticket?
a. $10,000
b. $15,000
c. $30,000
d. $45,000
Scenario 15-6
The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of
concert-goers: die-
hard fans and casual fans. For a particular WeR2Loud concert, there are 1,000
die-hard fans who will pay $150 for
a ticket and 500 casual fans who will pay $50 for a ticket.
There are 1,500 seats available at the concert venue.
Suppose the cost of putting on the concert is
$50,000, which includes the cost of the band, lighting, security, etc.
39.
Refer to Scenario 15–6. How much profit will the concert promoters earn if they set the price
of each ticket at $150?
a. $75,000
b. $100,000
c. $150,000
d. $175,000
40.
Refer to Scenario 15–6. How much profit will the concert promoters earn if they set the price
of each ticket at $50?
a. $25,000
b. $75,000
c. $100,000
d. $150,000
41.
Refer to Scenario 15–6. How much profit will the concert promoters earn if they engage in price
discrimination?
a. $100,000
b. $125,000
c. $150,000
d. $175,000