The Idea of Charging Two Different Groups of Consumers Two

question 46

Multiple Choice

The idea of charging two different groups of consumers two different prices is practiced in:

• A)price discrimination.
• B)two-part pricing.
• C)price matching.
• D)none of the statements associated with this question are correct.

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Definitions:

MM Model

Modigliani-Miller Model; a theory on capital structure that suggests the market value of a firm is determined by its earning power and the risk of its underlying assets.

Tax-Deductibility

Pertains to expenses that can be subtracted from gross income to reduce the total taxable income, thereby lowering the amount of tax owed.

Financial Leverage

Engaging borrowed assets to increase the anticipated yield from an investment.

Operating Leverage

The degree to which a company uses fixed operating costs, where a higher degree indicates that a small change in sales will have a larger impact on operating income.