The act of buying a commodity in one market at a lower price and selling it in another market at a higher price is known as:
a. buying long.
b. selling short.
c. a tariff.
d. arbitrage.
QUESTION 2Assume the price of Coca-Cola increases. As a result, your real income decreases and you decrease the quantity of Coca-Cola purchased each month. This is an example of the:
a. income effect.
b. consumer price effect.
c. revenue effect.
d. substitution effect.
QUESTION 3Which of the following is a necessary condition for price discrimination?
a. The seller must be able to divide the markets according to the different price elasticities of demand.
b. It must be difficult for one buyer to resell to another buyer.
c. Both a and b.
d. Neither a nor b.
QUESTION 4Assume the price of pizza decreases. As a result, your real income increases and you increase the quantity of pizza purchased each month. This is an example of the:
a. substitution effect.
b. income effect.
c. revenue effect.
d. consumer price effect.
QUESTION 5For a monopolist to practice price discrimination, one necessary condition is that the product offered for sale must be:
a. high quality.
b. expensive.
c. cheap.
d. impossible or difficult to resell.
QUESTION 6The income effect refers to a change in:
a. income because of changes in the CPI.
b. the quantity demanded of a good because of a change in the buyer's real income.
c. the quantity demanded of a good because of a change in the buyer's money income.
d. none of these.
QUESTION 7The strategy underlying price discrimination is to:
a. charge higher prices to customers who have better access to substitutes.
b. charge everyone the same price but limit the quantity they are allowed to buy.
c. increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand.
d. reduce per-unit costs by charging higher prices to those with the most elastic demand and lower prices to those with the most inelastic demand.
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