Overview
Chapter 11
Pricing with Market Power
1) Which of the following strategies are used by business firms to capture consumer surplus?
A) Price discrimination B) Bundling
C) Two-part tariffs D) all of the above
Answer: D
Diff: 1
Section: 11.1
2) Rather than charging a single price to all customers, a firm charges a higher price to men and a
lower price to women. By engaging in this practice, the firm:
A) is trying to reduce its costs and therefore increase its profit.
B) is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act.
C) is attempting to convert producer surplus into consumer surplus.
D) is attempting to convert consumer surplus into producer surplus.
E) Both A and C are correct.
Answer: D
Diff: 1
Section: 11.1
3) An electric power company uses block pricing for electricity sales. Block pricing is an example
of
A) first-degree price discrimination.
B) second-degree price discrimination.
C) third-degree price discrimination.
D) Block pricing is not a type of price discrimination.
Answer: B
Diff: 1
Section: 11.2
4) When a firm charges each customer the maximum price that the customer is willing to pay, the
firm
A) engages in a discrete pricing strategy.
B) charges the average reservation price.
C) engages in second-degree price discrimination.
D) engages in first-degree price discrimination.
Answer: D
Diff: 1
Section: 11.2
480
5) The maximum price that a consumer is willing to pay for each unit bought is the __________
price.
A) market
B) reservation
C) consumer surplus
D) auction
E) choke
Answer: B
Diff: 1
Section: 11.2
6) Second-degree price discrimination is the practice of charging
A) the reservation price to each customer.
B) different prices for different quantity blocks of the same good or service.
C) different groups of customers different prices for the same products.
D) each customer the maximum price that he or she is willing to pay.
Answer: B
Diff: 1
Section: 11.2
7) A firm is charging a different price for each unit purchased by a consumer. This is called
A) first-degree price discrimination.
B) second-degree price discrimination.
C) third-degree price discrimination.
D) fourth-degree price discrimination.
E) fifth-degree price discrimination.
Answer: A
Diff: 1
Section: 11.2
8) A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis
lessons for adults. The tennis pro is practicing
A) first-degree price discrimination.
B) second-degree price discrimination.
C) third-degree price discrimination.
D) fourth-degree price discrimination.
E) fifth-degree price discrimination.
Answer: C
Diff: 1
Section: 11.2
9) Discrimination based upon the quantity consumed is referred to as __________ price
discrimination.
A) first-degree B) second-degree
C) third-degree D) group
Answer: B
Diff: 1
Section: 11.2
481
10) A doctor charges two different prices for medical services, and the price level depends on the
patientsʹ income such that wealthy patients are charged more than poorer ones. This pricing
scheme represents a form of
A) first-degree price discrimination.
B) second-degree price discrimination.
C) third-degree price discrimination.
D) pricing at each consumerʹs reservation price.
Answer: C
Diff: 1
Section: 11.2
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