11 May WHY DOES THE GOVERNMENT GRANT PATENTS TO COMPANIES THAT RESEARCH NEW DRUGS?
Why does the government grant patents to companies that research new drugs?
17)
Why does the government grant patents universally rather than just to those
products that would not be developed without a patent?
7.4 Price Discrimination
1)
Price discrimination is when a firm charges
A)
the same price to all consumers.
B)
different prices for different goods to different consumers.
C)
different prices for the same goods to different consumers.
D)
None of the above is correct.
2)
The government allows firms to engage in price discrimination unless the
practice
A)
allows the firm to earn positive economic profits.
B)
reduces consumer surplus.
C)
drives rival firms out of business.
D)
increases prices to consumers.
3)
Which of the following situations would be examples of price discrimination?
A)
United Airlines charges customers who book 14 days ahead a lower price than
those who don’t.
B)
Chevron gas stations charges customers 20 cents more per gallon if they choose
the premium grade over the regular unleaded.
C)
The local carwash charges drivers of minivans and large SUVs a $2.00
“large vehicle” surcharge.
D)
GEICO, an insurance company, charges higher rates to those who received more
than one speeding ticket in the last 6 months.
4)
Which conditions must hold if a firm is to engage in price discrimination?
A)
It must be extremely difficult, if not impossible, for one consumer to resell a
product to another.
B)
Firms must have a sufficiently low amount of market power.
C)
Consumers must have very similar preferences for the product.
D)
all of the above
5)
In order to practice price discrimination a firm must
A)
avoid detection by the government.
B)
be able to divide consumers into groups with different demands for their
product.
C)
have a homogeneous product.
D)
advertise their product.
6)
In order to practice price discrimination a firm must
A)
avoid detection by the government.
B)
have some degree of market power.
C)
have a homogeneous product.
D)
advertise their product.
7)
The reason that the local telephone company is able to engage in price
discrimination between business and residential customers in providing local
phone service is that
A)
it is the only provider of local (landline) telephone service.
B)
it must be extremely difficult, if not impossible, for one consumer to resell
phone service to another.
C)
business and residential customers differ in their willingness to pay for phone
service.
D)
All of the above are correct.
8)
A school bookstore tried to engage in price discrimination by selling novels to
students and faculty for different prices. Its strategy was to increase prices
to faculty and decrease prices to students. What is the most likely reason that
this strategy failed?
A)
Novels are sold in a competitive market.
B)
There was nothing to prevent students from purchasing novels and reselling them
to faculty.
C)
Everyone had inelastic demand for novels.
D)
There was no easy way to distinguish the students from the faculty.
16)
Why does the government grant patents to companies that research new drugs? 17)
Why does the government grant patents universally rather than just to those
products that would not be developed without a patent? 7.4 Price Discrimination1)
Price discrimination is when a firm chargesA)
the same price to all consumers.B)
different prices for different goods to different consumers.C)
different prices for the same goods to different consumers.D)
None of the above is correct. 2)
The government allows firms to engage in price discrimination unless the
practiceA)
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