Chapter 23Question 11. A pharmaceutical company faces a price regulation where it cannot charge any

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Chapter 23Question 11. A pharmaceutical company faces a price regulation where it cannot charge any

Chapter 23Question 11. A pharmaceutical company faces a price regulation where it cannot charge any higher than$5,000 for a lifesaving drug. The company knows that the patients put a high value on thisproduct and are willing to pay up to $10,000 for it. The company will likelya. Not do anything-it is prohibited by law to increase its priceb. Bundle the drug with periodic blood testing, selling the bundle for $10,000c. Require that the patients have the drug administered by the company’s medical staff, foran additional $5,000d. Both B&C5 pointsQuestion 21. A pharmaceutical company faces a price regulation where it cannot charge any higher than$5,000 for a lifesaving drug. The company knows that the patients put a high value on thisproduct and are willing to pay up to $10,000 for it. The company decides to sell the drug togetherwith periodic blood testing for $10,000. This is an example ofa. Tyingb. Bundlingc. Fraud, the company is not allowed to sell for any higher than the regulatory pricd. Both A&B5 pointsQuestion 31. A pharmaceutical company faces a price regulation where it cannot charge any higher than$5,000 for a lifesaving drug. The company knows that the patients put a high value on thisproduct and are willing to pay up to $10,000 for it. The company decides to sell the drug at$5,000 but requires the patients to purchase periodic blood testing from them for $5,000. This isan example ofa. Tyingb. Bundlingc. Fraud, the company is not allowed to sell for any higher than the regulatory priced. Both A&B5 pointsQuestion 41. A pharmaceutical company faces a price regulation where it cannot charge any higher than$5,000 for a lifesaving drug. The company knows that the patients put a high value on thisproduct and are willing to pay up to $10,000 for it. The company decides to sell the drug at$5,000 and receives another $5,000 from administration through their exclusive medical serviceproviders. This is an example ofa. Tyingb. Exclusionc. Fraud, the company is not allowed to sell for any higher than the regulatory priced. Bundling5 pointsQuestion 51. An acquisition will not be profitablea. In any circumstancesb. As long as you paid lower than the company’s discounted future profitsc. Without a synergy that makes the company more valuable to you than to the currentownerd. None of the above5 pointsQuestion 61. An employer faces a higher minimum wage control where it cannot pay its workers any less than$10.25 an hour. The employer may react bya. Doing nothing-it cannot violate the regulationb. Offering the employees fewer fringe benefitsc. Increasing spending on workplace amenitiesd. Hiring additional workers5 pointsQuestion 71. An employer faces a minimum wage control where it cannot pay its workers any less than $10.25an hour. The employer knows that the workers value the jobs and are willing to work even atmuch less. The employer decides to offer them the minimum wage but forces them to buy theiruniforms from the employer. This is an example ofa. Fraudb. Tyingc. Bundlingd. Exclusion5 pointsQuestion 81. An employer faces a minimum wage control where it cannot pay its workers any less than $10.25an hour. The employer knows that the workers value the jobs and are willing to work even atmuch less. The employer decides to offer them the minimum wage, but successfully stops othersellers of work uniform from sell uniforms to its workers so that he can charge more for the oneshe sells. This is an example ofa. Tyingb. Fraudc. Exclusiond. Bundling5 pointsQuestion 91. Antitrust enforcement of vertical relationships is generally focused ona. The dominant firm using vertical contracts to extend market power to other levels of thesupply chainb. Vertical contracts that increase the intensity of competitionc. Vertical contracts that help consumersd. All of the above5 pointsQuestion 101. Mechanisms that manufacturers can use to deal with misaligned retailer incentives includea. All of the aboveb. compensating retailers sales staff for demonstrating, as well as selling, the productc. setting a minimum retail priced. providing an exclusive contract to a single retailed in a market5 pointsQuestion 111. The conditions in which vertical relationships can enhance a firm’s ability to price discriminateincludea. the manufacturer’s product is of value to just one type of customerb. the manufacturer acquires the distributer in the higher priced marketc. lack of competition provides the manufacturer with the ability to price above marginalcostd. the costs of arbitraging the price difference across markets is large5 pointsQuestion 121. The management of a rental building faces a rent control situation, where it cannot charge morethan $400 a month in rent on the apartment. The management knows that the apartments are highin demand and renters would be willing to be $1000 per month for them. The management willa. Do nothing-it cannot violate the regulationb. Offer a bundle of both the apartment and furniture together for $1000c. Offer the controlled rent but force the tenants to rent furniture from the managementd. Both B&C5 pointsQuestion 131. The management of a rental building faces a rent control situation, where it cannot charge morethan $400 a month in rent on the apartment. The management knows that the apartments are highin demand and renters would be willing to be $1000 per month for them. The managementdecides to only offer the furniture and apartment together for rent. This is an example ofa. Fraudb. Bundlingc. Exclusiond. Tying5 pointsQuestion 141. The management of a rental building faces a rent control situation, where it cannot charge morethan $400 a month in rent on the apartment. The management knows that the apartments are highin demand and renters would be willing to be $1000 per month for them. The managementdecides to offer controlled rent but force the tenants to rent furniture from them. This is anexample ofa. Bundlingb. Fraudc. Exclusiond. Tying5 pointsQuestion 151. The management of a rental building faces a rent control situation, where it cannot charge morethan $400 a month in rent on the apartment. The management knows that the apartments are highin demand and renters would be willing to be $1000 per month for them. The managementdecides to offer the controlled rent, rents furniture to its tenants, but successfully bars deliveryfrom competing furniture stores. This is an example ofa. Bundlingb. Tyingc. Fraudd. Exclusion5 pointsQuestion 161. The manufacturer has put in place a price discrimination policy, where it charges its householdcustomers more per unit than it charges its industrial users. The manufacturer wants to keep theretailer from arbitraging away the profits from the policy. The manufacturer shoulda. Vertically integrate into the retail operations in the household marketb. Vertically integrate into the retail operations in the industrial marketc. Reward the household market retailers for not arbitragingd. All of the above5 pointsQuestion 171. The problem of “double marginalization†isa. The retail price being too high due to an inclusion of both manufacturer and retailermarkupb. The retail price being too high due to an exclusion of manufacturer markupc. The retail price being too low due to an exclusion of retailer markupd. The retail price being too low due to an exclusion of both manufacturer and retailermarkup5 pointsQuestion 181. Vertical contracts that aim to decrease retailer prices typicallya. Benefit the retailer, hurt the manufacturer and consumerb. Hurts all the manufacturers, consumers and retailersc. Benefit the manufacturer, hurt the consumer and retailerd. Benefits the consumers, manufacturers and retailers5 pointsQuestion 191. Vertical contracts between manufacturers and retailers often aim toa. Prevent the manufacturers from upstream price discriminationb. Reward the manufacturer for undertaking the risk inherent in introducing a new productc. Serve as a “signal†of the manufacturer’s belief of the likely success of his productd. All of the above5 pointsQuestion 201. The various ways that vertical relationships can evade regulation includea. insuring tax rates are uniform across jurisdictionsb. bundling regulated and unregulated goodsc. preventing the exclusion of rival unregulated goodsd. tying the sale of a regulated good to a customer’s choice of an unregulated good

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