MBA 701 EXAM PRACTICE QUESTIONS
AND CORRECT ANSWERS.
A lot of people belong to various warehouse clubs, such as Costco or Sam's Club. The
appeal is that by buying items in bulk, you are charged a lower price per unit. What time
of pricing scheme is this?
a.
Second-degree price discrimination
b.
First-degree price discrimination
c.
Third-degree price discrimination
d.
Uniform pricing
e.
None of the listed answers are correct
a
Firms that provide services (e.g., haircuts, landscaping, medical care, and dental care) are
better able to engage in price discrimination. Why might this be the case?
a.
Service firms have more information about their customers.
b.
Service firms have more information about their costs.
c.
Service firms can readily prevent resale.
d.
Service firms can easily identify customer attributes associated with willingness to pay.
c
Second-degree price discrimination is best illustrated by which of the following?
a.
,Student discounts on public transportation.
b.
Senior citizen discounts at the grocery store.
c.
Volume discounts for buying in bulk.
d.
Airline pricing based on time of booking and seat class.
c
Suppose that a movie theatre has a pricing scheme where students, senior citizens, and
actively military personnel get various forms of discounts. What type of pricing policy is
this movie theatre engaging in?
a.
Second-degree price discrimination
b.
Uniform pricing
c.
First-degree price discrimination
d.
None of the listed answers are correct
e.
Third-degree price discrimination
e
To successfully practice price discrimination
a.
both "the firm must possess market power" and "it must be difficult for consumers in one
market to sell to consumers in the other market"
b.
the firm must be a pure monopoly
c.
it must be difficult for consumers in one market to sell to consumers in the other market
, d.
both "the firm must be a pure monopoly" and "it must be difficult for consumers in one
market to sell to consumers in the other market"
e.
the firm must possess market power
a
A firm is seeing a $500 loss in the short run. The fixed cost of operation for this firm is
$1,000. What is the best decision for this firm in the short run?
a.
There is not enough information provided to answer.
b.
This firm should produce more than what it is currently producing.
c.
This firm should shut down production.
d.
This firm should not shut down production.
d
A firm should shut down in the short run if the price of a good is less than its ________.
a.
average variable cost
b.
marginal cost
c.
average total cost
d.
average fixed cost
a
A firm with market power is producing a level of output at which price is $8, marginal
revenue is $5, average variable cost is $6, and marginal cost is $10. In order to maximize
AND CORRECT ANSWERS.
A lot of people belong to various warehouse clubs, such as Costco or Sam's Club. The
appeal is that by buying items in bulk, you are charged a lower price per unit. What time
of pricing scheme is this?
a.
Second-degree price discrimination
b.
First-degree price discrimination
c.
Third-degree price discrimination
d.
Uniform pricing
e.
None of the listed answers are correct
a
Firms that provide services (e.g., haircuts, landscaping, medical care, and dental care) are
better able to engage in price discrimination. Why might this be the case?
a.
Service firms have more information about their customers.
b.
Service firms have more information about their costs.
c.
Service firms can readily prevent resale.
d.
Service firms can easily identify customer attributes associated with willingness to pay.
c
Second-degree price discrimination is best illustrated by which of the following?
a.
,Student discounts on public transportation.
b.
Senior citizen discounts at the grocery store.
c.
Volume discounts for buying in bulk.
d.
Airline pricing based on time of booking and seat class.
c
Suppose that a movie theatre has a pricing scheme where students, senior citizens, and
actively military personnel get various forms of discounts. What type of pricing policy is
this movie theatre engaging in?
a.
Second-degree price discrimination
b.
Uniform pricing
c.
First-degree price discrimination
d.
None of the listed answers are correct
e.
Third-degree price discrimination
e
To successfully practice price discrimination
a.
both "the firm must possess market power" and "it must be difficult for consumers in one
market to sell to consumers in the other market"
b.
the firm must be a pure monopoly
c.
it must be difficult for consumers in one market to sell to consumers in the other market
, d.
both "the firm must be a pure monopoly" and "it must be difficult for consumers in one
market to sell to consumers in the other market"
e.
the firm must possess market power
a
A firm is seeing a $500 loss in the short run. The fixed cost of operation for this firm is
$1,000. What is the best decision for this firm in the short run?
a.
There is not enough information provided to answer.
b.
This firm should produce more than what it is currently producing.
c.
This firm should shut down production.
d.
This firm should not shut down production.
d
A firm should shut down in the short run if the price of a good is less than its ________.
a.
average variable cost
b.
marginal cost
c.
average total cost
d.
average fixed cost
a
A firm with market power is producing a level of output at which price is $8, marginal
revenue is $5, average variable cost is $6, and marginal cost is $10. In order to maximize
