ECON 1014 Exam 3 Practice
Questions (Mizzou) And All Correct
Answers 2025-2026 Updated.
New Beginnings Consignment Clothing is a clothing store located in downtown Columbia that
charges 10% lower prices for faculty, students, and veterans. This is an example of what? -
Answer Third degree price discrimination
Suppose that you are a monopolist who faces two markets with different demand curves.
Market 1's demand curve is elastic and Market 2's demand curve is inelastic. How do you
maximize profit? - Answer Charge a high price in Market 2 and a low price in Market 1.
Men's deodorant and women's deodorant are almost completely identical products. Even when
there are minor differences, such as in the smell, these differences result in only negligibly
different costs of production. Yet, women's deodorant is consistently more expensive than
men's deodorant. What can you infer about the relative elasticities of men and women's
demand for deodorant? - Answer Men's demand for deodorant is more elastic than
women's demand for deodorant.
Two months after Apple introduced the iPhone in 2007, the company reduced the price from
$600 to $400. How is this drop in price an example of price discrimination? - Answer Early
adopters are less sensitive to price than late adopters.
Why is it important for firms practicing price discrimination to prevent arbitrage of their
product? - Answer Arbitrage reduces the profits from price discrimination for firms because
buyers in the higher-priced market can buy the product at a lower price in the secondary
(resale/black) market.
In the video games industry, there is a practice known as "region-locking". Region-locking
involves implementing a physical, electronic, or digital system that prevents a video game from
one region from being used on a console from another region. For example, an American video
game cannot be played on a Japanese console, and vice versa. Why might video games
companies do this? - Answer To prevent people from importing games from a low-priced
region into a high-priced region.
Universities regularly engage in price discrimination. By what means do they do this? - Answer
By offering housing accommodations of differing qualities, by offering scholarships, and by
offering student discounts at collegiate sporting events
, II. The price discrimination may potentially benefit Americans, even though they pay a higher
price, since GSK's larger profits mean more research and development of new drugs for
Americans.
III. Price discrimination is beneficial in industries with large fixed costs like the pharmaceutical
industry, since price discrimination increases the size of the market, helping to spread large
costs over a greater number of consumers. - Answer I, II, and III
Gas masks require a filter in order to adequately protect the user from airborne threats. The gas
mask will last a long time while in use, but the filters will require frequent replacement. This is
an example of ________. - Answer tying
Refer to the previous question. If gas mask producers untied the purchasing of the masks and
the filters, we would expect their profits to ______? - Answer decrease
In fast food restaurants there are menu items called "combos" that include an entree, a side,
and a drink for a single price. This is an example of _______. - Answer bundling
In economic context, what is a cartel? - Answer A group of firms who collectively act as if
they were a single monopolist
Suppose you are the representative for a nation in OPEC, the world's largest cartel. All of the
other members have agreed to raise prices and cut production in order to increase profits. You
also agree to do this. However, what do you have the incentive to do when the other members
can't observe you? - Answer Increasing production above the agreed upon level, which will
lead to a decrease in prices.
How do professional sport leagues like the National Basketball League (NBA), Major League
Baseball (MLB), and the National Football League (NFL) behave like buyer's cartels? - Answer
They institute player drafts that prevent individual franchises from bidding up the salaries of
athletes.
One reason cartels have limited power is that demand curves become: - Answer more elastic
over time.
In an oligopolistic market, prices will tend to decrease towards the perfectly competitive level...
- Answer ...as the number of firms in the market increases.
Questions (Mizzou) And All Correct
Answers 2025-2026 Updated.
New Beginnings Consignment Clothing is a clothing store located in downtown Columbia that
charges 10% lower prices for faculty, students, and veterans. This is an example of what? -
Answer Third degree price discrimination
Suppose that you are a monopolist who faces two markets with different demand curves.
Market 1's demand curve is elastic and Market 2's demand curve is inelastic. How do you
maximize profit? - Answer Charge a high price in Market 2 and a low price in Market 1.
Men's deodorant and women's deodorant are almost completely identical products. Even when
there are minor differences, such as in the smell, these differences result in only negligibly
different costs of production. Yet, women's deodorant is consistently more expensive than
men's deodorant. What can you infer about the relative elasticities of men and women's
demand for deodorant? - Answer Men's demand for deodorant is more elastic than
women's demand for deodorant.
Two months after Apple introduced the iPhone in 2007, the company reduced the price from
$600 to $400. How is this drop in price an example of price discrimination? - Answer Early
adopters are less sensitive to price than late adopters.
Why is it important for firms practicing price discrimination to prevent arbitrage of their
product? - Answer Arbitrage reduces the profits from price discrimination for firms because
buyers in the higher-priced market can buy the product at a lower price in the secondary
(resale/black) market.
In the video games industry, there is a practice known as "region-locking". Region-locking
involves implementing a physical, electronic, or digital system that prevents a video game from
one region from being used on a console from another region. For example, an American video
game cannot be played on a Japanese console, and vice versa. Why might video games
companies do this? - Answer To prevent people from importing games from a low-priced
region into a high-priced region.
Universities regularly engage in price discrimination. By what means do they do this? - Answer
By offering housing accommodations of differing qualities, by offering scholarships, and by
offering student discounts at collegiate sporting events
, II. The price discrimination may potentially benefit Americans, even though they pay a higher
price, since GSK's larger profits mean more research and development of new drugs for
Americans.
III. Price discrimination is beneficial in industries with large fixed costs like the pharmaceutical
industry, since price discrimination increases the size of the market, helping to spread large
costs over a greater number of consumers. - Answer I, II, and III
Gas masks require a filter in order to adequately protect the user from airborne threats. The gas
mask will last a long time while in use, but the filters will require frequent replacement. This is
an example of ________. - Answer tying
Refer to the previous question. If gas mask producers untied the purchasing of the masks and
the filters, we would expect their profits to ______? - Answer decrease
In fast food restaurants there are menu items called "combos" that include an entree, a side,
and a drink for a single price. This is an example of _______. - Answer bundling
In economic context, what is a cartel? - Answer A group of firms who collectively act as if
they were a single monopolist
Suppose you are the representative for a nation in OPEC, the world's largest cartel. All of the
other members have agreed to raise prices and cut production in order to increase profits. You
also agree to do this. However, what do you have the incentive to do when the other members
can't observe you? - Answer Increasing production above the agreed upon level, which will
lead to a decrease in prices.
How do professional sport leagues like the National Basketball League (NBA), Major League
Baseball (MLB), and the National Football League (NFL) behave like buyer's cartels? - Answer
They institute player drafts that prevent individual franchises from bidding up the salaries of
athletes.
One reason cartels have limited power is that demand curves become: - Answer more elastic
over time.
In an oligopolistic market, prices will tend to decrease towards the perfectly competitive level...
- Answer ...as the number of firms in the market increases.
