Chapter 18 - Pricing Strategies

Quiz 13
1. A firm engages in price discrimination when it
A. Charges different prices for different units of different goods
B. Charges different prices for different units of the same good
C. Charges a higher price for units for which the willingness to pay is high than for those units
for which the willingness to pay is low
D. B and C
2. A monopolist can perfectly price discriminate
A. When it can distinguish consumers with a high versus low willingness to pay
B. When it offers a menu of alternatives, designed so that different customers will make
different choices based on their willingness to pay
C. If it knows perfectly the customer's willingness to pay for each unit its sells and can charge
a different price for each unit
D. B and C
3. Price discrimination is based on observable customer characteristics
A. When a firm can distinguish consumers with a high versus low willingness to pay
B. When a firm offers a menu of alternatives, designed so that different customers will make
different choices based on their willingness to pay
C. A monopolist knows perfectly the customer's willingness to pay for each unit its sells and
can charge a different price for each unit
D. B and C
4. Price discrimination is based on self-selection
A. When a firm can distinguish consumers with a high versus low willingness to pay
B. When a firm offers a menu of alternatives, designed so that different customers will make
different choices based on their willingness to pay
C. When a monopolist knows perfectly the customer's willingness to pay for each unit its sells
and can charge a different price for each unit
D. B and C
5. When a supermarket charges more per ounce for a small bottle of ketchup than a larger
one, it is engaging in
A. Price discrimination based on observable customer characteristics
B. Perfect price discrimination
C. Second degree price discrimination
D. Third degree price discrimination

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6. With a two-part tariff

A. Consumers simply pay a fixed fee if they buy anything at all
B. Consumers pay a fixed fee if they buy anything at all, plus a separate per-unit price for
each unit they buy
C. Consumers pay a fixed fee if they buy anything at all, plus an annual fee for the right to
purchase anything
D. Consumers simply pay a fee for the right to buy anything
7. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
, where
P is the per-minute price in dollars. The marginal cost of providing the wireless service is
$0.25 per minute. If Always There charges $0.25 per minute, how many minutes will each
customer buy each month?
A. 175
B. 200
C. 2
D. 225
8. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
, where
P is the per-minute price in dollars. The marginal cost of providing the wireless service is
$0.25 per minute. If Always There charges $0.25 per minute, how large of a fixed monthly fee
can it charge and still persuade customers to buy their service?
A. $200
B. $153.13
C. $306.25
D. $175
9. What then is Always There's profit per customer?
A. $153.13
B. $196.88
C. $200
D. $175
10. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
,
where P is the per-minute price in dollars. The marginal cost of providing the wireless service
is $0.25 per minute. If Always There charges $0.25 per minute, what is Always There's total
profit?
A. $30,626
B. $39,376
C. $40,000
D. $35,000

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11. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
, where
P is the per-minute price in dollars. The marginal cost of providing the wireless service is
$0.25 per minute. If Always There charges $0.50 per minute, how many minutes will each
customer buy each month?
A. 200
B. 150
C. 175
D. 250
12. If Always There charges $0.50 per minute, how large of a fixed monthly fee can it charge
and still persuade customers to buy their service?
A. $200
B. $150
C. $225
D. $112.5
13. If Always There charges $0.50 per minute, what is Always There's profit per customer?
A. $153.13
B. $150
C. $187.50
D. $37.50
14. If Always There charges $0.50 per minute, what is Always There's total profit?
A. $30,626
B. $30,000
C. $37,500
D. $7,500
15. Always There Wireless is wireless monopolist in a rural area. There are 200 customers,
each of whom has a monthly demand curve for wireless minutes of
,
where P is the per-minute price in dollars. The marginal cost of providing the wireless service
is $0.25 per minute. If Always There charges $0.50 per minute, what is the difference in profit
per customer compared to when it charges the marginal cost?
A. $6.25
B. $25
C. $3.13
D. $34.37

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16. A movie monopolist sells to students and adults. The demand function for students is
and the demand function for adults is
. The marginal
cost is $2 per ticket. Suppose the movie theater can price discriminate. What price per ticket
does the theater charge students to maximize profits?
A. $4
B. $7
C. $6
D. $12
17. What is the monopolist's profit from students?
A. $400
B. $2400
C. $2500
D. $0
18. How many tickets does the theater sell to adults to maximize profits?
A. 2500
B. 500
C. 200
D. 600
19. What price per ticket does the theater charge adults to maximize profits?
A. $4
B. $7
C. $6
D. $12
20. What is the monopolist's profit from adults?
A. $400
B. $2400
C. $2500
D. $0

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