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University of the Cumberlands MBA 531 ASSIGNMENT TEN CHAPTERS 13 DIRECT AND INDIRECT PRICE DISCRIMINATION MULTIPLE CHOICE 1)Which of the following is an example of price discrimination? a

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University of the Cumberlands

MBA 531

ASSIGNMENT TEN

CHAPTERS 13 DIRECT AND INDIRECT PRICE DISCRIMINATION MULTIPLE CHOICE

1)Which of the following is an example of price discrimination?

a.            Seniors paying a lower price for tickets at movie theatres

b.            Students paying discounted rates on travel

c.             Tourists paying higher prices on local attractions than locals d. All of the above

 

 

2.            The practice of buying a firm’s good in one market at a low price and selling it in another market for a higher price in order to profit from the price difference is known as

a.            Predatory pricing

b.            Price collusion c. Arbitrage

d. Mark-up pricing

 

 

3.            The consequences of price discrimination are

a.            Consummate more transactions

b.            Extract more consumer surplus

c.             Increase producer surplus d. All of the above

 

 

4.            Movie theatres offer seniors discounts because

a.            Seniors have a more inelastic demand for movie tickets b. Seniors have a more elastic demand for movie tickets

c. Seniors have a higher opportunity cost of their time

d. Only B&C

 

 

5.            Movie theatres offer senior discounts because

a.            Seniors have a more elastic demand for movie tickets

b.            Seniors have lower incomes

c.             Seniors have a lower opportunity cost of time d. All of the above

 

6.            Relative to simple pricing, price discrimination leads to

a.            Consumer surplus being converted to producer surplus

b.            Increased profits

c.             A simplified pricing schedule d. Both a and b

 

 

7.            When a firm practices perfect price discrimination,

a.            Consumer surplus is maximized

b.            Producer surplus is minimized c. Producer surplus is maximized

d. None of the above

 

 

8.            The idea behind price discrimination is

a.            To be able to sell to high-value customers, who value the product most

b.            To be able to sell to the marginal customers, who are indifferent about the purchase

c.             To be able to sell to the low-value customers, who would otherwise not buy the product d. To be able to sell to both high and low value customers at different prices

 

 

9.            Price discrimination is

a.            The practice of charging different prices to different individual buyers or customer groups

b.            The practice of differentiating the product to make demand less elastic

c.             The practice of deciding a single price to be charged to customers

d.            Always illegal

 

 

10.          Many bars close to campuses have started offering cheaper beer to consumers with a student ID. These bars

a.            Assume students have an inelastic demand curve

b.            Assume students have an elastic demand curve

c.             Are practicing price discrimination d. Both b and c

 

 

11.          Many bars close to campuses have started offering cheaper beer to consumers with a student IDs. These bars are using

a.            Direct price discrimination

b.            Indirect price discrimination

c.             Decreasing returns to scale

d.            None of the above

 

12.          For direct price discrimination to work effectively

a.            The low-valued customers should not be able to engage in arbitrage

b.            You need to charge the same price to the different groups

c.             Both groups should have the same elasticity of demand

d.            None of the above

 

 

13.          Amusement parks often offer discounts to locals with IDs. This is an example of a. A direct discrimination scheme

b.            An indirect discrimination scheme

c.             Diminishing marginal returns

d.            Vertical integration

 

 

14.          Public transit offers discounted monthly passes to students, which can only be bought and used with valid student IDs. The transit system is using

a.            A direct discrimination scheme

b.            An indirect discrimination scheme

c.             The Robinson-Patman act

d.            None of the above

 

 

15.          A firm practicing direct price discrimination will charge a higher price to

a.            Consumers known to have an elastic demand

b.            All consumers

c.             Consumers known to have an inelastic demand

d.            Consumers known to have a unitary elastic demand

 

 

16.          A firm practicing direct price discrimination will charge lower prices to a. Consumers with an elastic demand

b.            All consumers

c.             Consumers known to have an inelastic demand

d.            Consumers known to have a unitary elastic demand

 

 

17.          For direct price discrimination to work, the firm

a.            Must be able to identify members of the low value group

b.            Charge the low-value group lower prices than the rest

c.             Prevent the low-value group from reselling their low priced goods to higher-valued group d. All of the above

 

18.          For direct price discrimination to work,

a.            The firm need not be able to identify members of the low-value group

b.            The firm must charge a single price to all its customers

c.             The firm need not worry about any arbitrage since all its customers are charged the same price d. None of the above

 

 

19.          For direct price discrimination to work

a.            The firm must be able to identify the members of the low value group

b.            The firm must charge a single price to all its customers

c.             The firm need not worry about any arbitrage since all its customers are charged the same price

d.            The firm should charge a higher price to those customers with the most elastic demand

 

 

20.          For direct price discrimination to work

a.            The firm need not be able to identify the members of the low-value group

b.            The firm be able to charge the low-value customers a lower price than the higher-value customers

c.             The firm need not worry about any arbitrage since all its customers are charged the same price

d.            It needs to be too complicated for the customers to understand

 

 

21.          The Robinson-Patman act

a.            Is a part of the antitrust laws

b.            Makes it illegal to give a price discount on a good sold to another business

c.             Is also known as the Anti-Chain-store Act d. All of the above

 

22.          For a firm to maximize total profits through price discrimination, it should

a.            Charge a high price to consumers with an inelastic demand and low price to consumers with an elastic demand

b.            Charge a low price to consumers with an inelastic demand and high price to consumers with an elastic demand

c.             Charge the same price to both sets of consumers

d.            Charge nothing to both set of consumers-throw a party

 

 

23.          Indirect price discrimination differs from direct price discrimination because

a.            In indirect price discrimination high value consumers can sometimes still get the low price

b.            In direct price discrimination firms do not have to worry about cannibalizing

c.             Direct price discrimination encourages rivals to enter but indirect discrimination does not

d.            There is no difference between the two

 

24.          When deciding what price to charge customers, a firm may choose to charge different prices based on

customers’

a.            Age

b.            Willingness to pay

c.             Location

d.            All of the above

 

 

25.          Airlines charge a                               price to business travelers compared to leisure travelers because business travelers have a                demand than leisure travelers.

a.            Higher; more elastic b. Higher; less elastic

c. Lower; more elastic

d. Lower; less elastic

 

 

26.          Arbitrage

a.            Is the act of to buying low in one market and selling high in another market

b.            Can force a seller to go back to uniform pricing

c.             Can offset the benefits of direct price discrimination d. All of the above

 

 

27.          Which of the following is FALSE about indirect price discrimination a. The firm is able to identify each customer’s willingness to pay

b.            The firm is able to charge different prices to the different value customers

c.             The firm is be able to prevent arbitrage

d.            All of the above

 

 

28.          Which of the following is FALSE about indirect price discrimination

a.            It requires identifying some feature that is correlated with different value customers b. The firm must be able to charge different prices to the different value customers

c. The firm must be able to prevent arbitrage

d. All of the above

 

 

29.          Amusement parks often offer coupons to the local market that are not available to tourists. This is an example of

a.            Direct discrimination scheme b. Indirect discrimination scheme

c. Both of the above

d. None of the above

 

30.          Advance-purchase discounts offered by airlines are an example of

a.            Direct price discrimination b. Indirect price discrimination

c. All of the above

d. None of the above

 

 

 

 

SHORT ESSAYS

 

1.            A recent study by economists Steven Puller and Lisa Taylor found that airline tickets purchased over the weekend were priced 5% lower on average. Why would airlines charge lower prices to customers making bookings on the weekend?