ECN Exam 4 Study Guide 2026 | Economics Review, Practice Questions & Test
Prep
The law of one price - ✔✔is the constraint of a firm to charge a different price for the same
good across different markets
Price discrimination by a monopolist refers to charging different prices based on - ✔✔the
consumer's willingness to pay
When a monopolist switches from charging a single price to practicing perfect price
discrimination, it reduces - ✔✔consumer surplus
A college sets its tuition at $30k/year. Education activists concerned over student debt complain
that tuition is too high thus exacerbating the issue. The university claims that the tuition is just
the listing and that no student pays full tuition through financial aid. The activists then complain
that the university should list the final price and circumvent the financial aid for full
transparency. The university refuses on the grounds that this is a bad idea. Why? - ✔✔the
university is engaging in first degree price discrimination based on different students' willing to
pay for a college degree
There are two groups of 100 consumers each who never talk to each other; Group A who value
sky diving at $150 and Group B who value sky diving at $350. If the cost of sky diving is $50, how
much profit would you earn if you charged $150? - ✔✔200*(150-50) = 20,000
everyone buys.
There are two groups of 100 consumers each who never talk to each other; Group A who value
sky diving at $150 and Group B who value sky diving at $350. If the cost of sky diving is $50, how
much profit would you earn if you charged $350? - ✔✔100*(350-50) = 30,000
only group B buys.
, There are two groups of 100 consumers each who never talk to each other; Group A who value
sky diving at $150 and Group B who value sky diving at $350. If the cost of sky diving is $50,
what is the maximum profit you would earn if you charged a different price to each group? -
✔✔100*(150-50) + 100*(350-50) = $40,000
Group A buys at 150 and Group B buys at 350.
Generally, many pricing strategies are based on distinguishing between - ✔✔price sensitive
and price insensitive consumer
Which of the following does NOT explain why price dispersion exists? - ✔✔charging different
prices only works with time invariant consumers
Why does price dispersion exist - ✔✔firms exploit the existence of consumers have different
valuations across different markets,
firms don't know what price to charge so they just randomize price,
physical product characteristics might be similar, but other non-physical and non-price
attributes still exist
Pricing strategies work when - ✔✔consumers cannot engage in arbitrage, firms can extract
consumer surplus and deadweight loss, firms have market power
If the current bid is $36, what should Ember bid next? - ✔✔$37.00
What is the most likely final outcome of the auction? - ✔✔Avigail wins at $79
Suppose now that Phineas enters the auction with a valuation of $88. What is the most likely
outcome of the auction? - ✔✔Avigail wins at $89
Prep
The law of one price - ✔✔is the constraint of a firm to charge a different price for the same
good across different markets
Price discrimination by a monopolist refers to charging different prices based on - ✔✔the
consumer's willingness to pay
When a monopolist switches from charging a single price to practicing perfect price
discrimination, it reduces - ✔✔consumer surplus
A college sets its tuition at $30k/year. Education activists concerned over student debt complain
that tuition is too high thus exacerbating the issue. The university claims that the tuition is just
the listing and that no student pays full tuition through financial aid. The activists then complain
that the university should list the final price and circumvent the financial aid for full
transparency. The university refuses on the grounds that this is a bad idea. Why? - ✔✔the
university is engaging in first degree price discrimination based on different students' willing to
pay for a college degree
There are two groups of 100 consumers each who never talk to each other; Group A who value
sky diving at $150 and Group B who value sky diving at $350. If the cost of sky diving is $50, how
much profit would you earn if you charged $150? - ✔✔200*(150-50) = 20,000
everyone buys.
There are two groups of 100 consumers each who never talk to each other; Group A who value
sky diving at $150 and Group B who value sky diving at $350. If the cost of sky diving is $50, how
much profit would you earn if you charged $350? - ✔✔100*(350-50) = 30,000
only group B buys.
, There are two groups of 100 consumers each who never talk to each other; Group A who value
sky diving at $150 and Group B who value sky diving at $350. If the cost of sky diving is $50,
what is the maximum profit you would earn if you charged a different price to each group? -
✔✔100*(150-50) + 100*(350-50) = $40,000
Group A buys at 150 and Group B buys at 350.
Generally, many pricing strategies are based on distinguishing between - ✔✔price sensitive
and price insensitive consumer
Which of the following does NOT explain why price dispersion exists? - ✔✔charging different
prices only works with time invariant consumers
Why does price dispersion exist - ✔✔firms exploit the existence of consumers have different
valuations across different markets,
firms don't know what price to charge so they just randomize price,
physical product characteristics might be similar, but other non-physical and non-price
attributes still exist
Pricing strategies work when - ✔✔consumers cannot engage in arbitrage, firms can extract
consumer surplus and deadweight loss, firms have market power
If the current bid is $36, what should Ember bid next? - ✔✔$37.00
What is the most likely final outcome of the auction? - ✔✔Avigail wins at $79
Suppose now that Phineas enters the auction with a valuation of $88. What is the most likely
outcome of the auction? - ✔✔Avigail wins at $89
