week 9 problems and quiz
shahimermaid
week_9_quiz.docx|
Type of family |
Tennis membership only |
Golf membership only |
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Tennis-oriented |
$150 |
$50 |
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Golf-oriented |
$75 |
$200 |
If Mapleville Tennis & Golf Club plans to offer golf and tennis memberships separately, what prices should be charged for each kind of membership it wishes to maximize profit?
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Charge $75 for tennis memberships and $200 for golf memberships. |
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Charge $75 for tennis memberships and $50 for golf memberships. |
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Charge $150 for tennis memberships and $200 for golf memberships. |
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Charge $150 for tennis memberships and $50 for golf memberships. |
2. Second-degree price discrimination
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is also known as block rate setting. |
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captures all consumer surplus. |
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sets a different price for each customer. |
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can only be used when customers can be segmented into groups. |
3. If the price elasticity of demand for bananas is -1.5 and the price elasticity of demand for grapefruit is -2.5, and the marginal cost of producing each of the items is $0.50 each, what is the profit-maximizing price for each?
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Bananas: $1.50; Grapefruit: $0.83 |
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Bananas: $0.75; Grapefruit: $1.25 |
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Bananas: $0.34; Grapefruit: $0.20 |
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Bananas: $0.75; Grapefruit: $1.25 |
4. In ____ price discrimination, it is possible for the entire consumer surplus to be captured by the seller.
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first-degree |
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second-degree |
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third-degree |
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a and b |
5. The segmenting of customers into several small groups such as household, institutional, commercial, and industrial users, and establishing a different rate schedule for each group is known as
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first-degree price discrimination. |
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market penetration. |
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third-degree price discrimination. |
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second-degree price discrimination. |
6. ______ is the price at which an intermediate good or service is transferred from the selling to the buying division within the same firm.
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Incremental price |
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Marginal price |
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Full-cost price |
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Transfer price |
7. _______ is a pricing strategy for newly introduced products that results in a high initial product price. This price is reduced over time as demand at the higher price is satisfied.
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Prestige pricing |
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Price lining |
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Skimming |
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Incremental pricing |
8. Which of the following is NOT a shortcoming of cost-plus pricing?
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Most often the actual profit margin will be less than profit maximizing margin. |
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Cost-plus pricing allows firms to set prices equal to a predetermined markup above average costs. |
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It is unlikely that arbitrary rules or historical precedent to choose a markup will product the maximum profit. |
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Because cost-plus pricing involves average rather than marginal cost, it does not use the MR=MC rule to find the profit maximizing rate of production. |
9. Which of the following is considered a necessary condition for successful price discrimination?
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A firm's customers must all have the same price elasticity of demand. |
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Firms must be able to determine each customer's maximum willingness to pay for the product in question. |
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Firms are able to prevent resale among different groups of customers. |
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Firms must operate in a perfectly competitive market. |
10. Other things being equal, a firm's profits will be greatest when it practices
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first-degree price discrimination. |
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second-degree price discrimination. |
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third-degree price discrimination. |
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no price discrimination. |
11. Which of the following is NOT considered to be a form of price discrimination?
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Declining block pricing |
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Group pricing |
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Bundling multiple products |
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Personalized pricing |
12. Which of the following is an example of bundling?
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Charging an admission to a nightclub as well as requiring patrons to pay for their drinks. |
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Charging students and seniors a lower price for movie tickets than adults. |
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Purchasing a cell phone plan that includes texting and internet access. |
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Charging $5 per pair of socks and also offering a bag of 5 pairs for $15. |
13. Many years ago, the Wall Street Journal published an article about a dating service. The article noted that men were charged $300, above the $250 charged for women. The dating service’s owner said that the difference in price compensated for inequities in pay scales between men and women. Which of the following statements below is an alternative explanation that an economist would look for?
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Men have a higher (or more elastic) price elasticity of demand for dating services than do women. |
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More women than men use dating services. |
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More men than women use dating services. |
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Men have a lower (or less elastic) price elasticity of demand for dating services than do women. |
14. Which of the statements about price discrimination is FALSE?
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It must be possible to segment the market. |
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It must be difficult to transfer the seller's product from one market segment to another. |
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Public utilities practice first-degree price discrimination. |
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There must be differences in the elasticity of demand from one customer segment to another. |
15. In ____ price discrimination, the monopolist charges each consumer the highest price that purchaser is willing to pay for each unit purchased (provided that this price exceeds the marginal cost of production).
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first-degree |
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second-degree |
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third-degree |
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a and b |
