Midterm

Question 1

Microeconomics studies the allocation of:

a. decision-makers.
b. scarce resources.
c. models.
d. unlimited resources.

Answer 1

b. scarce resources.

Question 2

Managerial economics

a. describes how to pay for managers is set.
b. ensures managers always make good decisions.
c. helps managers make decisions in the face of scarcity.
d. explains which products consumers will buy.

Answer 2

c. helps managers make decisions in the face of scarcity.

Question 3

Microeconomic models are used to

a. make predictions.
b. explain real-life phenomena.
c. evaluate production alternatives.
d. All of the above.

Answer 3

d. All of the above.

Question 4

Managerial Economics as a specialized branch of Economics

a. Provide ready-made solutions to business problems
b. Provide logic and methodology to find solutions to business problems
c. provide alternative answers to specific business problems.
d. Provide a theoretical background to analyze business problems

Answer 4

b. Provide logic and methodology to find solutions to business problems

Question 5

Managerial economics generally refers to the integration of economic theory with business

a. Management
b. All of the above
c. Practice
d. Ethics

Answer 5

c. Practice

Question 6

A managerial decision is not profitable if

a. it increases some revenues more than it decreases others.
b. it increases revenue more than costs.
c. it decreases some cost more than it increases others.
d. it increases costs more than revenue

Answer 6

d. it increases costs more than revenue

Question 7

According to the profit-maximization goal, the firm should attempt to maximize short-run profits since there is too much uncertainty associated with long-run profits.

a. False
b. True

Answer 7

a. False

Question 8

Managerial economics is best defined as the economic study of:

a. how businesses can decide on the best use of scarce resources.
b. how businesses can sell the most products.
c. how businesses can make the most profits.
d. how businesses can operate at the lowest costs.

Answer 8

a. how businesses can decide on the best use of scarce resources.

Question 9

Managerial economics:

a. explains which products consumers will buy.
b. helps managers make decisions in the face of scarcity.
c. ensures managers always make good decisions.
d. describes how pay for managers is set.

Answer 9

b. helps managers make decisions in the face of scarcity.

Question 10

Microeconomics includes the study of the;

a. aggregate effects on the national economy.
b. nationwide unemployment rate.
c. recessions and inflation in the global economy.
d. choices made by individuals and businesses.
e. reasons why the government changes interest rates.

Answer 10

d. choices made by individuals and businesses.

Question 11

The form of economics most relevant to managerial decision-making within the firm is:

a. welfare economics
b. macroeconomics
c. microeconomics
d. free-enterprise economics

Answer 11

c. microeconomics

Question 12

CEOs should focus on

a. minimizing costs.
b. beating their competitors.
c. maximizing firm profits.
d. getting the best pay package for the senior management team.

Answer 12

c. maximizing firm profits

Question 13

Golda Rush quit her job as a manager for Home Depot to start her own hairdressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her explicit costs?

a. $45,000
b. $45,500
c. $47,000
d. $87,000

Answer 13

b. $45,500

Question 14

Economic costs include implicit costs but not explicit costs.

a. True
b. False

Answer 14

b. False

Question 15

Table 12-1
Quantity	    Total Cost     Variable Cost
                    (dollars)	  (dollars)
    0	            $1,000	  $0
100	              1,360	            360
200	              1,560	            560
300	              1,960	            960
400	             2,760	            1,760
500	             4,000	           3,000
600	             5,800	           4,800

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
Refer to Table 12-1. What is the fixed cost of production?
a. $0
b. $500
c. $1,000
d. It cannot be determined.

Answer 15

c. $1,000

Question 16

Table 12-1
Quantity	    Total Cost     Variable Cost
                    (dollars)	  (dollars)
    0	            $1,000	  $0
100	              1,360	            360
200	              1,560	            560
300	              1,960	            960
400	             2,760	            1,760
500	             4,000	           3,000
600	             5,800	           4,800

Refer to Table 12-1. If the market price of each camera case is $8, what is the profit-maximizing quantity?

a. 300 units
b. 400 units
c. 500 units
d. 600 units

Answer 16

b. 400 units

Question 17

Table 12-1
Quantity	    Total Cost     Variable Cost
                    (dollars)	  (dollars)
    0	            $1,000	  $0
100	              1,360	            360
200	              1,560	            560
300	              1,960	            960
400	             2,760	            1,760
500	             4,000	           3,000
600	             5,800	           4,800

Refer to Table 12-1. If the market price of each camera case is $8, what is the firm’s total revenue?

a. $2,400
b. $3,200
c. $4000
d. $4,800

Answer 17

b. $3,200

Question 18

Table 12-1
Quantity	    Total Cost     Variable Cost
                    (dollars)	  (dollars)
    0	            $1,000	  $0
100	              1,360	            360
200	              1,560	            560
300	              1,960	            960
400	             2,760	            1,760
500	             4,000	           3,000
600	             5,800	           4,800

Refer to Table 12-1. If the market price of each camera case is $8 and the firm maximizes profit, what is the amount of the firm’s profit or loss?

a. $0 (it breaks even)
b. loss of $1,000
c. profit of $440
d. loss of $440

Answer 18

c. profit of $440

Question 19

Table 12-1
Quantity	    Total Cost     Variable Cost
                    (dollars)	  (dollars)
    0	            $1,000	  $0
100	              1,360	            360
200	              1,560	            560
300	              1,960	            960
400	             2,760	            1,760
500	             4,000	           3,000
600	             5,800	           4,800

Refer to Table 12-1. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. What happens to the firm’s profit-maximizing output level?

a. It must fall.
b. It must rise to offset the increased cost.
c. It will remain the same.
d. The firm will shut down.

Answer 19

c. It will remain the same.

Question 20

Table 12-1
Quantity	    Total Cost     Variable Cost
                    (dollars)	  (dollars)
    0	            $1,000	  $0
100	              1,360	            360
200	              1,560	            560
300	              1,960	            960
400	             2,760	            1,760
500	             4,000	           3,000
600	             5,800	           4,800

Refer to Table 12-1. The firm will not produce in the short run if the output price falls below

a. $8.
b. $4.
c. $3.20.
d. $2.80.

Answer 20

d. $2.80

Question 21

Golda Rush quit her job as a manager for Home Depot to start her own hairdressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs?

a. $80,000
b. $41,500
c. $42,000
d. $70,000

Answer 21

b. $41,500

Question 22

Accounting costs exclude implicit costs.

a. True
b. False

Answer 22

a. True

Question 23

Adam spent $10,000 on new equipment for his small business, “Adam’s Fitness Studio.” Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true?

a. The variable cost of running the studio is $22,000.
b. The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he’ll need to continue operations is a marginal cost.
c. The fixed cost of running the studio is $22,000.
d. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he’ll need to continue operations is a variable cost.

Answer 23

d. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he’ll need to continue operations is a variable cost.

Question 24

Table 11-7
Quantity Fixed Cost Variable Total Average
of (dollars) Cost Cost Total Cost
Lanterns (dollars) (dollars) (dollars)
75 200 170 370 4.93
80 200 230 430 5.36
90 200 7.67
100 200 810
115 200 11.8
117 200 1264 1464 12.5
120 200 1480

Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the variable cost of production when the firm produces 115 lanterns?
a. $956
b. $1,157
c. $10.05
d. $1,556

Answer 24

b. $1,157

Question 25

Table 11-7
Quantity Fixed Cost Variable Total Average
of (dollars) Cost Cost Total Cost
Lanterns (dollars) (dollars) (dollars)
75 200 170 370 4.93
80 200 230 430 5.36
90 200 7.67
100 200 810
115 200 1157 1357 11.8
117 200 1264 1464 12.5
120 200 1480

Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the average total cost of production when the firm produces 120 lanterns?
a. $72
b. $1,680
c. $12.3
d. $14

Answer 25

d. $14

Question 26

Table 11-7
Quantity Fixed Cost Variable Total Average
of (dollars) Cost Cost Total Cost
Lanterns (dollars) (dollars) (dollars)
75 200 170 370 4.93
80 200 230 430 5.36
90 200 7.67
100 200 810
115 200 1157 1357 11.8
117 200 1264 1464 12.5
120 200 1480 1680 14

Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the average variable cost per unit of production when the firm produces 90 lanterns?
a. $490
b. $7.67
c. $33.67
d. $5.44

Answer 26

d. $5.44

Question 27

Table 11-7
Quantity Fixed Cost Variable Total Average
of (dollars) Cost Cost Total Cost
Lanterns (dollars) (dollars) (dollars)
75 200 170 370 4.93
80 200 230 430 5.36
90 200 490 690 7.67
100 200 810 1010 10.01
115 200 1157 1357 11.8
117 200 1264 1464 12.5
120 200 1480 1680 14

Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the marginal cost per unit of production when the firm produces 100 lanterns?
a. $8.1
b. $11.1
c. $420
d. $32

Answer 27

d. $32

Question 28

Unlike an accountant, an economist measures costs on a(n) ________ basis.

a. explicit
b. replacement
c. conservative
d. historical

Answer 28

b. replacement

Question 29

When an economist uses the term “cost” referring to a firm, the economist refers to the

a. cost that can be actually verified and measured.
b. explicit cost of producing a good or service but not the implicit cost of producing a good or service.
c. implicit cost of producing a good or service but not the explicit cost of producing a good or service.
d. the opportunity cost of producing a good or service, which includes both implicit and explicit costs.
e. price of the good to the consumer.

Answer 29

d. the opportunity cost of producing a good or service, which includes both implicit and explicit costs.

Question 30

Accounting costs

a. usually include implicit costs.
b. usually include normal profits.
c. are replacements costs.
d. are historical costs.

Answer 30

d. are historical costs

Question 31

A firm earns a normal profit when its total revenues just offset both the ________ cost and ________ cost.

a. accounting; replacement
b. explicit; accounting
c. accounting; opportunity
d. historical; replacement

Answer 31

c. accounting; opportunity

Question 32

If Melissa owns a software company that incurs no fixed costs, then

a. her marginal cost must equal zero.
b. her total cost equals her total variable cost.
c. she will earn an economic profit.
d. her total variable cost is less than her total cost.
e. her total cost equals zero.

Answer 32

b. her total cost equals her total variable costs

Question 33

In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of capital is a

a. fixed cost.
b. marginal cost.
c. variable cost.
d. short-run cost.
e. productivity cost.

Answer 33

a. fixed cost

Question 34

Because the amount of labor a firm employs can be changed, the cost of labor is known as

a. variable cost.
b. an unavoidable cost.
c. fixed cost.
d. minimum cost.
e. maximum c

Answer 34

a. variable cost

Question 35

Marginal cost equals

a. the change in fixed cost that results from a one-unit increase in output.
b. total cost minus total variable cost.
c. total variable cost divided by total output.
d. total fixed cost divided by total output.
e. the change in total cost that results from a one-unit increase in output.

Answer 35

e. the change in total cost that results from a one-unit increase in output.

Question 36

Lauren runs a chili restaurant in San Francisco. Her total revenue last year was $110,000. The rent on her restaurant was $48,000, her labor costs were $42,000, and her materials, food and other variable costs were $20,000. Lauren could have worked as a biologist and earned $50,000 per year. An economist calculates her implicit costs as

a. $50,000.
b. $110,000.
c. $63,000.
d. $150,000.
e. $0 because Lauren did not work as a biologist.

Answer 36

a. $50,000

Question 37

A factor of production that can be easily changed in the relevant time period is called a:

a. variable input.
b. fixed input.
c. substitution input.
d. temporary input.

Answer 37

a. variable input.

Question 38

If an increase in income leads to an increase in the demand for peanut butter, then peanut butter is

a. a neutral good.
b. a normal good.
c. a necessity.
d. a compliment.

Answer 38

b. a normal good

Question 39

Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are

a. substitutes in consumption.
b. both inferior goods.
c. complements in consumption.
d. both luxury goods.

Answer 39

c. complements in consumption

Question 40

A change in which variable will change the market demand for a product?

a. the price of the product
b. population
c. technology
d. the prices of substitutes in production

Answer 40

b. population

Question 41

Suppose the value of the price elasticity of demand is -3. What does this mean?

a. A 1% increase in the price of the good causes the quantity demanded to increase by 3%.
b. A 1% increase in the price of the good causes quantity demanded to decrease by 3%.
c. A 3% increase in the price of the good causes quantity demanded to decrease by 1%.
d. A $1 increase in price causes quantity demanded to fall by 3 units.

Answer 41

b. a 1% increase in the price of the good causes quantity demanded to decrease by 3%.

Question 42

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

a. substitutes.
b. complements.
c. inferior.
d. normal.

Answer 42

b. complements

Question 43

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that

a. an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good.
b. an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good.
c. a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.
d. an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity.

Answer 43

b. an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good.

Question 44

Which of the following statements about the price elasticity of demand is correct?

a. The elasticity of demand for a good, in general, is equal to the elasticity of demand for a specific brand of the good.
b. The absolute value of the elasticity of demand ranges from zero to one.
c. Demand is more elastic in the long run than it is in the short run.
d. Demand is more elastic the smaller the percentage of the consumer’s budget the item takes up.

Answer 44

c. Demand is more elastic in the long run than it is in the short run.

Question 45

Third-degree price discrimination exists whenever:

a. the seller knows exactly how much each a potential customer is willing to pay and will charge accordingly.
b. different prices are charged by blocks of services.
c. the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups.
d. the seller will bargain with buyers in each of the markets to obtain the best possible price.

Answer 45

c. the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups.

Question 46

Charging a different price for tickets to movies at twilight than after 6 o’clock is an example of bundling.

a. True
b. False

Answer 46

b. False

Explanation: This does not group units. It is an example of third-degree price discrimination, however.

Question 47

Suppose a used-car salesman asks you the most you would be able to pay for a car and, unthinkingly, you answer truthfully, $4,800. Suppose, amazingly, that $4,800 is exactly the price for the car that you are presently examining. Then, the used-car salesman has effectively used perfect price discrimination on you.

a. True
b. False

Answer 47

a. True

Question 48

A sale on men’s slacks at T.J. Maxx, where if you buy the first pair at full price, you can buy the second pair at half price, is an example of differential pricing.

a. True
b. False

Answer 48

a. True

Question 49

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

a. a necessity
b. a normal good.
c. a neutral good.
d. an inferior good.

Answer 49

d. an inferior good

Question 50

Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are

a. both luxury goods.
b. complements in consumption.
c. substitutes in consumption.
d. both inferior goods.

Answer 50

c. substitutes in consumption

Question 51

The price elasticity of demand for Stork ice cream is -4. Suppose you’re told that following a price increase, the quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded?

a. 25 percent
b. 40 percent
c. 2.5 percent
    d. 0.4 percent

Answer 51

c. 2.5 percent

Price Elasticity of Demand = %∆Q / %∆P
-4=-10/%∆P
%∆P=-10/-4=2.5

Question 52

Consider the following pairs of items:
	a. shampoo and conditioner
	b. iPhones and earbuds
	c. a laptop computer and a desktop computer
	d. beef and pork
	e. air-travel and weed killer
Which of the pairs listed will have a negative cross-price elasticity?
	Select one:
	a. c and d only
	b. a and b only
	c. a, b, and c only
        d. e only

Answer 52

b. a and b only

Explanation: When the cross elasticity of demand between two goods is negative then these goods are known as complementary goods. In the above case shampoo and conditioner, iPhones and earbuds are an example of complementary goods.

Question 53

If a 5 percent increase in income leads to a 10 percent increase in quantity demanded for airline travel, then airline travel is

a. a necessity.
b. a substitute for another good.
 	c. a luxury.
    d. an inferior good.

Answer 53

c. a luxury

Question 54

The demand for gasoline in the short run is
a. unit-elastic because people tend to consume a
stable amount of gasoline per period.
b. elastic because people can easily switch to
public transportation.
c. inelastic because there are no good substitutes
for gasoline.
d. perfectly inelastic because people have no
choice but to buy gasoline.

Answer 54

c. inelastic because there are no good substitutes for gasoline.

Question 55

For a price discriminating airline, if the demand for business travelers were to expand, a proactive price discriminator would expand the number of seat assignments to business travelers and likely raise business traveler ticket prices.

a. True
b. It is neither false nor true
c. False
    d. It could be true or false

Answer 55

a. True

Question 56

A restaurant in an isolated spot on the coast of Maine sells only complete meals at a fixed price (called prix fixe), with the opportunity to select à la carte choices. Which type of price discrimination is being practiced?

a. two-part tariffs
b. bundling
c. universal access
    d. first-degree price discrimination

Answer 56

b. bundling

Question 57

Selling tickets in the orchestra region of the Metropolitan Opera for $55 and selling tickets in the upper balcony for $28 to listen to Luciano Pavoratti describes which type of price discrimination?
Select one:
a. This is not necessarily pricing discrimination
b. bundling
c. third-degree price discrimination
d. first-degree price discrimination

Answer 57

c. third-degree price discrimination

Question 58

If an economist says that firm practices price discrimination, that firm is:
a. Charging different prices for the same good or
service.
b. Exploiting the poor.
c. Producing two products, one with decreasing
returns to scale and the other with increasing
returns
d. Making great efforts to keep its costs as low as
possible.

Answer 58

a. Charging different prices for the same good or service.

Question 59

Vacation tours to Europe invariably package visits to disparate regions: cities, mountains, and the seaside. Bundling, a type of second-degree price discrimination, is most profitable when:
a. preference for the seaside is always higher than
preferences for city excursions
b. a preference for cities is always higher than
preferences for mountain vistas.
c. preference rankings of vacationers traveling
together are positively correlated.
d. the preference rankings of vacationers traveling
together are negatively correlated.

Answer 59

d. the preference rankings of vacationers traveling together are negatively correlated.

Question 60

Charging a different price for tickets to movies at twilight than after 6 o’clock is an example of bundling.
a. It can be true or false
b. It is impossible to determine the validity of the
statement based on the given information.
c. True
d. False

Answer 60

d. False

Question 61

Suppose a used-car salesman asks you the most you would be able to pay for a car and, unthinkingly, you answer truthfully, $4,800. Suppose, amazingly, that $4,800 is exactly the price for the car that you are presently examining. Then, the used-car salesman has effectively used perfect price discrimination on you.
a. True
b. False
c. The validity of the statement cannot be
determined based on the given information.
d. The statement is neither true nor false

Answer 61

a. True

Question 62

A sale on men’s slacks at T.J. Maxx, where if you buy the first pair at full price, you can buy the second pair at half price, is an example of differential pricing.
a. True
b. False
c. The statement can be either true or false
d. The validity of the statement cannot be
determined based on the given information.

Answer 62

a. True

Question 63

Which of the statements about price discrimination is (are) false?
a. Public utilities practice first-degree price
discrimination.
b. It must be possible to segment the market.
c. It must be difficult to transfer the seller’s product
from one market segment to another.
d. There must be differences in the elasticity of
demand from one segment to another.

Answer 63

a. Public utilities practice first-degree price discrimination.

Question 64

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone
a. strawberries and whipped cream are
complements.
b. strawberries are a normal good and whipped
cream is an inferior good.
c. strawberries and whipped cream are normal
goods.
d. strawberries and whipped cream and substitutes.

Answer 64

a. strawberries and whipped cream are complements.

Question 65

If the price of music downloads was to decrease, then
a. the demand for MP3 players would decrease.
b. the demand for MP3 players would increase.
c. the quantity demanded of MP3 players would
decrease.
d. the supply of MP3 players would increase.

Answer 65

b. the demand for MP3 players would increase.

Question 66

A change in all of the following variables will change the market demand for a product except

a. tastes.
b. population and demographics.
c. the price of the product.
    d. income.

Answer 66

c. the price of the product.

Question 67

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded

a. will decrease by 5 percent.
b. will increase by 5 percent.
c. will increase by 45 percent.
    d. will decrease by 45 percent.

Answer 67

d. will decrease by 45 percent

Elasticity = % ∆ in quantity demanded ÷ % ∆ in price
-3 = % ∆ in quantity demanded / 15%
% ∆ in quantity demanded = -45%

Question 68

Linesha, a college student working part-time receives a wage increase. An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information
a. DVDs and Blu-ray discs are substitutes.
b. DVDs and Blu-ray discs are normal goods.
c. the cross-price elasticity between DVDs and Blu-
ray discs are negative.
d. Blu-ray discs are normal goods and DVDs are
inferior goods.

Answer 68

d. Blu-ray discs are normal goods and DVDs are inferior goods.

Question 69

Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton’s income elasticity of demand for potatoes is
a. negative, so Sefton considers potatoes to be a
normal good.
b. positive, so Sefton considers potatoes to be an
inferior good.
c. negative, so Sefton considers potatoes to be an
inferior good.
d. positive, so Sefton considers potatoes to be a
normal good and a necessity.

Answer 69

c. negative, so Sefton considers potatoes to be an inferior good.

Question 70

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because
a. buyers of steel are less sensitive to a price
change if they have more time to adjust to the
price change.
b. sales revenue in the building industry will fall
sharply.
c. buyers of steel are more sensitive to a price
change if they have more time to adjust to the
price change.
d. profits will fall by a greater amount in the long run
than in the short run.

Answer 70

c. buyers of steel are more sensitive to a price change if they have more time to adjust to the price change.

Question 71

Some electric utilities offer one rate to commercial users and a different rate to residential users. This is an example of:

a. bundling
b. peak-load pricing
c. third-degree price discrimination
    d. universal access pricing

Answer 71

c. third-degree price discrimination

Question 72

First (Perfect) degree price discrimination means that a firm charge:
a. Different prices to people of different racial or
ethnic backgrounds.
b. Different prices to different groups of buyers.
c. The maximum amount that buyers are willing to
pay for each unit.
d. One single price—the maximum possible—to all
of its buyers.

Answer 72

c. The maximum amount that buyers are willing to pay for each unit.

Question 73

If a firm charges customers $200 per unit of the first unit purchased and $160 per unit for each additional unit purchased in excess of one unit. Then, what is the economic term of this strategy?

a. Second-degree price discrimination
b. Third -degree price discrimination
c. First-degree price discrimination
    d. Profit maximization pricing

Answer 73

a. Second-degree price discrimination