1.Which of the following statements about price discrimination is TRUE?
| | A.Price discrimination is a way for firms to extract some consumer surplus as an additional profit. |
| | B.Price discrimination involves offering the same food at SAME prices to different people. |
| | C.In reality, it is much easier to implement 1st degree price discrimination than 3rd degree. |
| | D.3rd degree price discrimination relies on the fact that multiple groups have the SAME elasticities for a product. |
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2.Which of the following is an example of THIRD-degree price discrimination?
| | A.Netflix uses data mining techniques to figure out each consumer's willingness to pay for their service. They then charge each consumer exactly his/her willingness to pay. |
| | B.Costco posts a discrete schedule of declining prices for different quantities of toilet paper. |
| | C.A restaurant in Bloomington offers a student discount to anyone who shows a valid IU student id card. |
| | D.A golf club charges members an annual membership fee of $3,000 in addition to a usage fee of $40 every time they use the club facilities. |
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3.In a two-part pricing strategy, the fixed fee is equal to ______.
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4.You operate a small candy store in town and you are thinking of initiating a two-part pricing strategy. All consumers must be official members of your store in order to shop there, and you will charge them an annual "membership fee" in addition to a per-unit charge for each piece of candy they buy.
If total annual demand for candy is Q = 100 - P and marginal cost for each candy is $3, what is the optimal two-part pricing strategy? (Assume there are 100 consumers in your market.)
(Round to the nearest dollar.)
| | A.Per-unit charge is $3; Fixed fee is $97. |
| | B.Per-unit charge is $3; Fixed fee is $47. |
| | C.Per-unit charge is $1; Fixed fee is $97. |
| | D.Per-unit charge is $1; Fixed fee is $47. |
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5.A strategy in which a firm intentionally varies its price in an attempt to "hide" price information from consumers and rivals is called ______.
| | C.Third-degree price discrimination |
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6.Which of the following is an example of "peak-load pricing?"
| | A.Best Buy offers year-round price matching against online retailers. |
| | B.Throughout the course of a day, airlies randomly change the price of a particular route. |
| | C.General Mills customers continue to buy General Mills cereal even if another firm offers a slightly better price. |
| | D.Duke Energy (an electric company) charges households higher prices for electricity during the daytime hours. |
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7.Your friend is an executive at Sony and you are surprised to learn that Sony actually loses money on each PlayStation 4 console they sell! However, they make a ton of profit on Play Station 4 games. Which pricing strategy is Sony most likely using?
| | A.First-degree price discrimination |
