Pricing Strategies for Firms with Market Power

According to the simple pricing rule for a monopolist, what is the profit-maximizing price if the own-price elasticity of demand is -3 and the marginal cost is $50?

What is the primary goal of first-degree price discrimination?

A firm implements a two-part pricing strategy where a consumer's demand is given by Q = 20 - P and the marginal cost is $2. What is the optimal per-unit charge and the fixed fee?

Which of the following pricing strategies is most relevant for a firm that has significant cost complementarities and where consumer demand for its products is interdependent?

In a homogeneous-product Cournot industry with 5 identical firms, the market elasticity of demand is -1.5. If each firm's marginal cost is $10, what is the profit-maximizing equilibrium price?

What is commodity bundling?

A firm with a marginal cost of $20 uses a pricing gun that scans a consumer’s demand curve and computes the maximum price to charge. What strategy is the firm using?

What is the phenomenon of 'double marginalization' in the context of transfer pricing?

A manager using a price-matching strategy advertises a price and a promise to match any lower price. What is the likely outcome if all firms in a Bertrand oligopoly adopt this strategy?

An electric utility faces a higher demand during the day and a lower demand at night, and it operates at full capacity during the day. What pricing strategy should it use to maximize profits?

Under the profit-maximizing markup rule for a monopoly, P = [EF/(1 + EF)]MC, as the demand for the firm's product becomes more elastic, what happens to the profit-maximizing markup?

A movie theater offers discounts to senior citizens. This is an example of which type of price discrimination?

What is the key advantage of randomized pricing in a market with intense price competition?

A consumer's inverse demand for a product is P = 50 - 0.5Q. The firm's marginal cost is $10. If the firm uses block pricing, what is the optimal price to charge for a package containing the optimal number of units?

What is the optimal transfer price a firm should set for an input sold by an upstream division to a downstream division, assuming no external market for the input?

A manager of a firm with an own-price elasticity of demand of -0.8 wants to increase revenue. According to the total revenue test, what should the manager do?

A firm sells to two groups. Group 1 has a demand elasticity of -3. Group 2 has a demand elasticity of -5. If the firm can engage in third-degree price discrimination, which group will be charged a lower price?

Which of these pricing strategies requires that the firm can prevent resale between customers?

A consumer values a computer at $1,500 and a monitor at $300. Another consumer values the computer at $2,000 and the monitor at $200. If the firm cannot price discriminate, what strategy can it use to earn more than by pricing each component separately?

The profit-maximizing advertising-to-sales ratio is given by A/R = EQ,A / (-EQ,P). If a firm's advertising elasticity is 0.1 and its own-price elasticity is -2.5, what is its optimal advertising-to-sales ratio?

For a homogeneous-product Cournot oligopoly with N firms, what is the relationship between the elasticity of demand for an individual firm’s product (EF) and the market elasticity of demand (EM)?

Which of the following pricing strategies is a firm using when it offers 'frequent-filler' programs for gasoline?

What is a major caveat to keep in mind when using a markup formula based on a single estimate of demand elasticity?

A consumer's inverse demand for gum is P = 0.20 - 0.04Q, and the marginal cost is zero. What is the profit-maximizing price for a package of 5 pieces of gum?

The inverse demand for a monopolist's product is P = 100 - 2Q and its cost function is C(Q) = 10 + 2Q. What are the profit-maximizing output and price?