Q2. Which of the following conditions must be satisfied for price discrimination to be successful?

a. The seller must have a different product for each group of customers.

b. The seller must be able to identify each customer as having a high or low value.

c. The seller must be able to prevent arbitrage between the two groups.

d. None of the above.

Answer: D

3. Perfect price discrimination is when a firm can charge each customer exactly what they are willing to
pay. In this case,

a. the demand curve is very inelastic.

b. the marginal revenue is the demand curve.

c. the demand curve is very elastic.

d. the marginal cost curve is the average cost curve.

Answer: B

7. Assume that the price elasticity of demand for movie theatres is 20.85 during all evening shows but
for all afternoon shows the price elasticity of demand is 22.28. For the theater to maximize total
revenue, it should

a. charge the same price for both shows, holding other things constant.

b. charge a higher price for the afternoon shows and lower price for the evening shows, holding other
things constant.

c. charge a lower price for the afternoon shows and higher price for the evening shows, holding other
things constant.

d. Need more information.

Answer: C

9. Airlines attempt to charge a ____ price to business travelers compared to leisure travelers because
business travelers have a ________ demand than leisure travelers.

a. higher; more elastic

b. higher; less elastic

c. lower; more elastic

d. lower; less elastic

Answer: B

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 14.3 Your family business produces a secret recipe salsa and distributes it through both smaller specialty
stores and chain supermarkets. The chains have been demanding sizable discounts but you do not want
to drop your prices to the specialty stores. When can you legally accommodate the chains without losing
profits from the specialty stores?

Answer: For Chain Supermarkets, if the Demand on discount is linked to number of sales or target sales
then sales can be improved without losing the profit.
 In Chapter 13, the authors discuss the price discrimination policy practiced by the
Hermitage museum in Russia (i.e., locals get a deep discount on the admission fee) as well
as the extensive efforts used by some locals and visitors to arbitrage this price difference.
Museums, theme parks, and other tourist attractions in the US also practice this local/visitor
price discrimination policy in various ways --- for example, the venues may distribute
coupons for discounted admission in local newspapers or by local direct mail. Please provide
three additional examples in which locals and visitors pay different prices for goods or
services.

Answer:

Museum charges differently for different people

700 Rubels for Foreigners

400 Rubels for Russians and Belarusians

Free for Preschool and students

Free on Every first Thursday for all visitors

As locals already pay the taxes to the government so they are already paying for the maintenance for the
museum but foreigners are not, and hence they charge foreigners the high price than the local visitors.

In US , foreigners pays to hotels, restaurants and even contributing to tourism and transportation and if
US museums and theme parks charge them high entrance fee it discourages the tourists and since they
contributes in the form of rents, restaurants , they are contributing taxes.

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