Price Discrimination quiz #1 Flashcards
Price Discrimination quiz #1
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Why do monopolists engage in price discrimination? Monopolists engage in price discrimination to increase profits by charging different prices to customers based on their willingness to pay. Which of the following are conditions necessary for price discrimination? The firm must have market power, be able to segregate the market into distinct groups, and prevent resale of the product. Who usually benefits from price discrimination? The monopolist usually benefits from price discrimination by earning higher profits; some consumers may benefit if they pay lower prices. Which of the following is true for a monopolist that engages in perfect price discrimination? The monopolist captures all consumer surplus and eliminates deadweight loss, producing at the efficient quantity. Which of the following statements about price discrimination is not true? Price discrimination is possible without market power. (This is not true; market power is required.) Which of the following is a necessary condition for price discrimination? The ability to prevent resale of the product. Which of the following is a result of perfect price discrimination? Consumer surplus is eliminated and all surplus becomes profit for the monopolist. Which would definitely not be an example of price discrimination? Charging all customers the same price for a product regardless of their willingness to pay. Which of the following terms is not associated with price discrimination in the global marketplace? Uniform pricing. Which of the following is not an example of imperfect price discrimination? Charging each customer their exact maximum willingness to pay. (This is perfect price discrimination.) Monopolies will price discriminate if which of the following is true? They have market power, can segment the market, and can prevent resale. Which case below best represents a case of third-degree price discrimination? A movie theater charging different prices to adults and children. Which of the following are ways in which firms price-discriminate? Charging different prices to different groups based on elasticity of demand, such as student discounts or senior pricing. Which of the following statements is true of price discrimination? Price discrimination allows firms to increase profits by charging different prices to different customers. Which of the following is a result of perfect price discrimination? Deadweight loss is eliminated and the monopolist produces the efficient quantity. Which of the following is an example of a price-discriminating monopoly? A software company charging higher prices to businesses and lower prices to students for the same product. A firm with market power engages in price discrimination in order to Increase its profits by capturing more consumer surplus. A monopolist's profits with price discrimination will be Higher than without price discrimination, as more consumer surplus is captured. If a monopolist is able to perfectly price discriminate, what happens to consumer surplus? Consumer surplus is eliminated; all surplus becomes profit for the monopolist. If a monopolist is able to perfectly price discriminate, what happens to deadweight loss? Deadweight loss is eliminated, and the monopolist produces the efficient quantity. A monopolist that practices perfect price discrimination Charges each customer their maximum willingness to pay and produces the efficient quantity. A price-discriminating monopolist can increase profits by Segmenting the market and charging different prices based on customers' willingness to pay. A perfectly price-discriminating monopolist Captures all consumer surplus and eliminates deadweight loss. Price discrimination adds to social welfare in the form of Eliminating deadweight loss when perfect price discrimination occurs, increasing total surplus. Which of the following statements about price discrimination is correct? Price discrimination requires market power, market segmentation, and prevention of resale. Which of the following is not an example of price discrimination? Selling the same product at the same price to all customers. Which of the following firms would be able to price-discriminate most successfully? A firm with strong market power and the ability to prevent resale, such as a software company with license keys. The term perfect price discrimination means charging Each customer their maximum willingness to pay. Price discrimination is only possible when _______. The firm has market power, can segment the market, and can prevent resale. Price discrimination works best when The firm can accurately identify customers' willingness to pay and prevent resale. A firm cannot price discriminate if Customers can easily resell the product to others. If a firm engages in perfect price discrimination, it charges Each customer the highest price they are willing to pay. Which of the following is the best example of a captive pricing strategy: Selling a printer at a low price but charging high prices for replacement ink cartridges. If a firm sells the same product to different buyers at different prices, it may be considered Engaging in price discrimination. Grouping two or more products together and pricing them as a unit is called Bundling. Price discrimination is a rational strategy for a profit-maximizing monopolist when Different customers have different willingness to pay and resale can be prevented. Which of the following is an example of price discrimination A movie theater charging lower prices to students than to adults for the same ticket. When a pure monopoly practices first-degree price discrimination: It charges each customer their maximum willingness to pay, capturing all consumer surplus. Third-degree price discrimination charges different prices to different consumers in order to: Reflect differences in elasticity of demand among consumer groups and increase profits.
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