Question 1

How does coupon clipping allow for price discrimination?

Accepted Answer

Coupon clipping allows for price discrimination by offering different prices to consumers who use coupons and those who do not. This is because some consumers may find the effort of finding and using coupons to be greater than the benefit of a lower price, while others may highly value the savings and prioritize coupon use. By charging different prices to these groups, businesses can effectively price discriminate based on willingness to engage in coupon clipping.

Question 2

When we say that firms must be price makers in order to practice price discrimination,it means that this activity cannot occur with

Accepted Answer

Price discrimination requires a certain degree of market power, which means that the firm must be able to set different prices for different groups of consumers. In a perfectly competitive market, no individual firm has the power to influence the price, as they are price takers. Therefore, price discrimination cannot occur in a competitive market.

Question 3

At the Kickin' Chicken Family Restaurant,which of the following menu items represents the company's attempt to price discriminate?

Accepted Answer

Option B is an example of price discrimination because it involves charging different prices for products that are essentially the same, based on the context or presentation rather than the actual product difference.

Question 4

A local discount store offers customers three options for printing their photos: a self-printing kiosk,one-hour photos,and next-day prints.The most likely reason this type of firm bothers to offer so many different options to its bargain-hunting consumers is because

Accepted Answer

The answer of A local discount store offers customers three...

Question 5

Bakeries will often offer a discount on items that were made the day before but did not sell.How is this an example of price discrimination?

Accepted Answer

By offering a discount on items made the day before, the bakery is able to cater to a specific group of buyers who value day-old products but are not willing to pay full price for fresh products. This is an example of price discrimination, as the bakery is charging different prices to different groups of buyers based on their willingness to pay.

Question 6

What is the primary benefit of price discrimination?

Accepted Answer

Price discrimination allows firms to capture a larger share of consumer surplus by charging different prices to different groups of consumers based on their willingness to pay. This increases profits for firms and also benefits consumers by enabling them to purchase a product at a lower price if they are more price-sensitive. As a result, price discrimination can reduce market inefficiencies and increase overall economic welfare.

Question 7

________ maximizes the quantity of goods sold because it matches each consumer with his or her willingness to pay.

Accepted Answer

Perfect price discrimination allows a monopolist to charge each consumer their maximum willingness to pay, thereby maximizing the quantity of goods sold. This occurs because consumers who would not have purchased the good at a uniform price are now able to purchase it at a lower price more in line with their willingness to pay, increasing overall demand and sales for the monopolist.

Question 8

Service providers like cable companies have tiered pricing and also charge their customers according to a schedule of fees.Sometimes customers are able to get fees or service charges waived for a certain amount of time if they contact customer service and threaten to cancel their service.This type of negotiation is an attempt to practice

Accepted Answer

The answer of Service providers like cable companies have tiered...

Question 9

Despite the fact that a single price can provide ________ for both producer and consumer,it causes ________,resulting from market inefficiency.

Accepted Answer

A single price can provide surplus for both producer and consumer by allowing them to gain more than they would in a perfectly competitive market. However, it can also cause deadweight loss, which is a loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

Question 10

Which of the following situations is considered price discrimination?

Accepted Answer

Barnes & Noble is offering a lower price to members, who must pay an annual fee, while non-members are charged a higher price. This is an example of price discrimination. The other options involve offering a lower price for a specific reason (dollar menu, older model, fleet vehicles) or conducting research (TripAdvisor), which is not considered price discrimination.

Question 11

A common feature among perfect competition and perfect price discrimination is the elimination of

Accepted Answer

In both perfect competition and perfect price discrimination, deadweight loss is eliminated. In perfect competition, price is determined by the intersection of the supply and demand curves, and all units are sold at the same price, which maximizes social welfare and eliminates deadweight loss. In perfect price discrimination, the monopolist charges each individual customer their reservation price, which maximizes profit and eliminates deadweight loss as well.

Question 12

Dine-in restaurants typically have their lowest business volume on Monday and Tuesday nights.Besides appealing to consumers on a budget,how might a restaurant benefit from charging discounted prices on these nights?

Accepted Answer

By offering discounted prices on Monday and Tuesday nights, the restaurant is creating an incentive for consumers to choose their establishment over competitors who may not offer discounts. This can capture revenue that may have otherwise gone elsewhere and increase overall profitability. Additionally, it can lead to repeat business as customers may come back on other nights when prices are not discounted.

Question 13

The local coffee shop,Latté Café,has a frequent-buyer program that offers a 5 percent discount to customers who "like" its business page on Facebook.This allows the firm to price discriminate because

Accepted Answer

By requiring the customer to take a specific action, in this case, liking the business page on Facebook, the firm can identify customers who are sensitive to price and offer them a discount. This allows the firm to charge a higher price to customers who are less price-sensitive, resulting in price discrimination. Additionally, the requirement for the customer to visit the business's Facebook page increases engagement and exposure for the business.

Question 14

Many food retailers offer loyalty cards that track purchases and offer free items to customers after a certain threshold of purchases.Is this an example of price discrimination?

Accepted Answer

This is an example of price discrimination because the store is offering different rewards to customers based on how much they spend. The free items represent a value that is different for different customers.

Question 15

As the quantity of different prices charged by a firm ________,the amount of ________ generated increases.

Accepted Answer

As the quantity of different prices charged by a firm increases, it can better capture consumer surplus and convert it into profit, thus increasing the firm's profit.

Question 16

A potential complication for successful price discrimination is

Accepted Answer

The potential for consumers to resell a product or service is a complication for successful price discrimination because it allows consumers who purchase the product at a lower price to sell it to those facing a higher price, undermining the price discrimination strategy.

Question 17

Teryn booked a flight to Boston for her little sister's wedding.When she boarded the plane,she found out that Frugal Fred,in the seat beside her,paid $100 less for his ticket.Teryn paid a higher price for her flight since she is more

Accepted Answer

Teryn is likely price-inelastic because attending her little sister's wedding is a special event that she would not want to miss, regardless of the ticket cost. Therefore, she would be willing to pay a higher price for her flight. Frugal Fred, on the other hand, may be more price-elastic and more focused on finding a cheaper ticket.

Question 18

________ transfers the consumer surplus under perfect competition to the producer.

Accepted Answer

Perfect price discrimination allows the producer to charge each consumer the maximum amount they are willing to pay for a product, which results in the entire consumer surplus being transferred to the producer. This is not the case for other market structures like monopolistic competition, where some consumer surplus remains. Deadweight loss and social welfare are concepts that are not directly related to the transfer of consumer surplus. Profit maximizing is a goal of all market structures, but it does not necessarily result in the transfer of the entire consumer surplus to the producer.

Question 19

Airlines have first-class or business-class seating,for which customers pay a higher price to receive more room,extra amenities,and more attentive service.Would this illustrate price discrimination?

Accepted Answer

The answer of Airlines have first-class or business-class seating,for which...

Question 20

Post-Thanksgiving consumers are already separated into distinct groups: those who shop on Black Friday and those who do not shop on Black Friday:
A carnival of capitalism,Black Friday is the day after Thanksgiving,when retailers across the country dangle deep discounts to lure customers out of bed.Black Friday is also the official beginning of the holiday-buying frenzy.As retailers battled to draw customers into their stores on Black Friday,online merchants were plotting a cunning ambush-offering an arsenal of mobile-only deals intended to pick off shoppers as they wait in line.In 2011,with a record-breaking Black Friday-shoppers spent $816 million online,26 percent more than in 2010.Cyber Monday,the Monday after Thanksgiving,might have started as a made-up occasion to give underdog e-commerce sites a day of their own,but it has become an undeniably real thing-surprising even to the people who invented it.
The excerpt indicates that Cyber Monday and online sales

Accepted Answer

The excerpt states that Cyber Monday and online merchants are offering mobile-only deals to pick off shoppers as they wait in line on Black Friday. This shows that these online sales are specifically targeting Black Friday shoppers, further dividing them into two groups: those who prefer to find deals in person and those who are willing to get better deals online.

Quiz 11: Price Discrimination