Question

Which of the following is the basis of price discrimination’s practice of charging different prices?

a.	the time of day	b.	differing price elasticities of demand
c.	differences in costs	d.	differing price elasticities of supply

If a firm is to successfully price discriminate, which of the following is true?

a.	The firm must be earning an economic profit prior to introducing price discrimination.	b.	The product must have no substitutes.
c.	The firm must be unable to segment the market.	d.	It is nearly impossible for buyers to purchase and resell the firm’s product.

Which of the following does the two-part pricing strategy charge?

a.	An access fee and an exit fee	b.	Two prices for the same good
c.	An access fee and a user fee	d.	A user fee and an exit fee

What is the least likely strategy of two-part pricing?

a.	Country clubs	b.	Night clubs
c.	Costco	d.	Furniture stores

Answer 1

Q1) The answer is (b) differing price elasticities of demand

different price elasticity of demand is a necessary condition for the practice of price discrimination strategies.

All other options are incorrect as price discrimination can be carried out even if they do not hold

Q2) The answer is (d) It is nearly impossible for buyers to purchase and resell the firm’s product.

If the products can be resold the prices will be brought down to one level due to the exploitation of arbitrage opportunities.

All other options are incorrect as price discrimination can be carried out even if they do not hold

Q3) The answer is (c) an access fee and user fee

This is how a two-part pricing works that is a combination of a fixed cost and variable costs

All other options are incorrect as there is no exit fee and it is not common to see two prices for the same good.

Q4) The answer is (d) Furniture stores

There is no entry fee charged for entering a furniture store and all costs are variable

Rest all options indicates services which are common examples of two-part tariff