MBA 701 - Chapter 11 Questions and Answers 100% Solved

MBA 701 - Chapter 11 Questions and Answers 100% Solved One of the most basic pricing strategies for firms with market power is to set price such that marginal revenue equals ________ __________. marginal cost. Suppose the inverse demand function is:P = 12 - 4Q, and cost is given by C(Q) = 4Q.The profit-maximizing price equals 8 The higher the marginal cost, the higher the profit-maximizing _________. price Which of the following pricing strategies extract additional surplus from consumers? Block pricing commodity bundling price discrimination two-part pricing Consider the following pricing strategy:"Accept the market price as given and sell all you can at that price."To which market structure does this apply? a. Monopoly b. Monopolistic competition c. Perfect Competition d. Oligopoly c. Suppose an airline has the ability to determine consumers' willingness-to-pay for air travel based on time of purchase, destination, and whether the trip includes a Saturday stay-over. If the airline acts on this information and charges each consumer a different price, what is this called? a. First-degree price discrimination b. Third-degree price discrimination c. Second-degree price discrimination d. First-degree, two-part pricing a. Which pricing strategy is easily employed by monopolists, Cournot oligopolists, and monopolistic competitors? a. Set price such that MR MC b. Set price such that MR = MC c. Set price such that MR MC b. A sandwich shop has identified two groups of consumers for its pulled-pork sandwiches: A and B. Group A's price elasticity of demand is -3.75 and group B's is -1.8. If there is no possibility of resale, then the shop should charge a higher price to which group? a. Group B b. Charge both groups the same c. Group A a. Suppose the inverse demand function is: P = 12 - Q, and cost is given by C(Q) = 4Q. If marginal revenue is MR = 12 - 2Q and marginal cost is MC = 4, then the profit-maximizing level of output equals ____________ and the profit-maximizing price equals $____________. 4 ; 8 A health club charges consumers an enrollment fee and also a monthly fee. This is an example of __________-__________ pricing. two ; part If demand is highly elastic, what is true of the profit-maximizing markup? Why? a. It is relatively low due to the availability of substitutes. b. It is relatively high due to the availability of substitutes. c. It is relatively high due to the lack of substitutes. d. It is relatively low due to the lack of substitutes. a. Which of the following can yield profits higher than those achieved by charging a single price to all buyers? Price discrimination Commodity bundling Block ricing If a firm manager is able to determine and charge the maximum amount that each consumer would be willing to pay for a good or service, it is called - ____________ degree price discrimination first In two-part pricing, the optimal fixed fee is the amount of the _________ surplus. consumer In order to maximize profits under a third-degree price discrimination scheme, a firm with market power produces the output where marginal revenue a. is greater than marginal cost to each group. b. equals marginal cost to each group. c. is less than marginal cost to each group. b. Six-packs of soda, cartons of eggs, and three-packs of paper towels are all examples of products sold using what kind of pricing strategy? a. two-part pricing. b. block pricing. c. first-degree price discrimination. d. commodity bundling. b. When a firm charges a fee for the right to purchase a product plus a per-unit charge for each unit purchased, what type of pricing strategy is the firm employing? a. Block pricing b. Two-part pricing c. Commodity bundling d. Third-degree price discrimination b. How does block pricing enhance a firm's profits? a. Sellers gain from bulk production decisions. b. It forces consumers to make an all-or-nothing purchase. c. It allows buyers to consume more at lower prices. b.