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.
