ECON 2X03 Chapter 14, 15 & 16: Key Terms for Final Exam

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emeraldwombat611

14 Jun 2016

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Price discrimination: the price searching practice of selling the same good to different customers at different prices. There are three broad cases: perfect price discrimination, ordinary price discrimination and multipart pricing. Market segmentation: the practice of a monopolist to divide the market into different groups, each of which receives a different price. It is also known as first degree price discrimination. ) Ordinary price discrimination: the case in which the monopolist identifies potential customers by groups, and charges each group a separate price. (the firm segments the market into two or three groups and charges each group a separate price. It is also known as third degree price discrimination. ) Multipart pricing: when a monopolist charges different rates for different amounts, or. Also known as block pricing. (the firm charges different prices based on the size of block of the good purchased). Arbitrage: the act of buying a good in a low price market and reselling it in a high price market.

Related Questions

Which of the following is TRUE?

Select one:

a. Monopoly results in a higher quantity of output being sold compared with perfect competition.

b. Price discrimination occurs when there are differences in prices that reflect differences in marginal cost.

c. Charging all customers the same price when costs vary can actually be a case of price discrimination.

d. Price discrimination guarantees that the monopolist will make a profit.

Which of the following statements is TRUE?

Select one:

a. At the monopolist's equilibrium, resources are being efficiently allocated.

b. With a monopoly, the value to society of the last unit produced is less than it's production cost.

c. Monopolists raise the price and restrict production, compared to a competitive situation.

d. A monopolist always produces a higher level of output than would be produced if the market were competitive.

graycat195

Question 1

The amount of profit that can be achieved using uniform pricing is __________ the profit that can be achieved from price discrimination because of _______.

Select one:

a. greater than; the cost of trying to determine every single consumer's individual demand (willingness to pay) is prohibitively expensive.

b. less than; uniform pricing is more costly so the ATC and AVC curves are higher than they are under price discrimination.

c. equal to; the TR and TC curves are equivalent under either pricing scheme, so there is no profit advantage to either scheme.

d. less than; total demand includes people who would be willing to pay more than, as well as less than, the uniform market price.

Question 2

A firm selling in two markets is practicing price discrimination:

Select one:

a. when it refuses to sell the good to some group of consumers.

b. anytime it charges different consumers different prices.

c. when it charges the same price to different consumers as long as they differ in their demand for the good.

d. when it is charging different consumers, different prices, and the price difference is not based upon cost differences.

Question 3

To successfully practice price discrimination:

Select one:

a. consumers in two separate markets must have identical demand.

b. the firm must possess market power.

c. it must be easy for consumers in one market to sell to consumers in the other market.

d. the firm must be a pure monopoly.

Question 4

If it could practice first-degree price discrimination, a firm with market power could earn:

Select one:

a. its typical monopoly profit as well as the area which, under uniform pricing, would represent the deadweight loss associated with market power.

b. an area half the size of its monopoly power under uniform pricing.

c. its typical monopoly profit as well as the area which, under uniform pricing, would represent consumer surplus.

d. its typical monopoly profit as well as the area which, under uniform pricing, would represent consumer surplus and the deadweight loss associated with market power.

erinant26

16. A monopoly will set the price

at the highest price along the demand it faces.

equal to the value at which marginal cost intersects the demand curve.

so that it can sell the quantity at which marginal revenue is equal to marginal cost.

so that it can sell the quantity at which marginal revenue is equal to zero.

17.

A monopolist will always end up choosing to operate

even if its profit are negative.

on the elastic portion of the demand it faces.

until such time as a new competitor enters its market.

only if it can capture the entire consumer surplus.

18.

When first-degree price discrimination is perfectly implemented social gain is maximized, with all gains going to the monopoly.

True

False

19.

Which of the following is the best example of second-degree price discrimination?

A car salesman attempts to discover and charge the highest price that the customer is willing to pay.

A sub sandwich shop that gives you a half-price sandwich for every six sandwiches you purchase.

Manufacturersâ use of discount coupons printed in Sunday newspapers.

Polaroid cameras and film.

20.

Third-degree price discrimination occurs when a monopoly separates its customers into distinct markets, charging a different price to each group.

True

False

orangealligator623

ECON 2X03 Chapter 14, 15 & 16: Key Terms for Final Exam

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