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Exam 16: Pricing Strategy

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Question 91

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Figure 16-5 -Refer to Figure 16-5.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the quantity it should produce?

A) 240 units
B) 320 units
C) 480 units
D) 560 units

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Question 92

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The following table contains the actual prices charged by four Web sites for a 3D Collector's Edition Blu-ray disc of the movie Marvel's Avengers: Age of Ultron in November 2015. $\begin{array} { | l | c | } \hline \text { Amazon } & \$ 24.99 \\\hline \text { Walmart } & 25.48 \\\hline \text { Best Buy } & 29.99 \\\hline \text { Disney Store } & 29.99 \\\hline\end{array}$ Explain whether the information in this table contradicts the law of one price.

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Unless there are big differenc...

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Question 93

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Are sellers who practice arbitrage taking advantage of buyers?

The network of devices directly communicating data to a computer without a person having to enter the data is known as

Figure 16-1 -Refer to Figure 16-1.What is the price charged under perfect price discrimination?

The law of one price holds exactly only if there are transactions costs associated with buying a product in one location and selling it in another location.

Many clothing manufacturers are able to practice price discrimination by selling products in department stores and also in outlet stores.

Figure 16-1 -Refer to Figure 16-1.What is the economically efficient output level?

A firm using a two-part tariff faces a tradeoff because

Consider the following actions undertaken by a firm: A.charging a higher price for products of higher quality B.charging different prices to different consumers for the same product when the variation cannot be explained by cost differences C.charging different prices for products of different qualities D.charging a lower price to match a competitor's price Which of the above will be considered price discrimination?

Figure 16-5 -Refer to Figure 16-5.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the revenue collected from the fixed fee portion of the price?

If the selling price of a firm's product is $500 and the estimated average cost of producing this product is $400,what is the firm's markup?

Which of the following firms is not able to practice price discrimination?

Watanabe Sensei operates the only martial arts school in Hartfield.For simplicity,assume that consumers have identical demand curves and that Sensei knows what this demand curve is.Figure 16-6 shows this demand curve. -Refer to Figure 16-6.With a two-part pricing scheme - a monopoly price for classes and a one-time membership fee - what is the amount of producer surplus Sensei will earn?

Assume a firm is able to use an optimal two-part tariff. a.Is the outcome economically efficient? Why or why not? b.What happens to consumer surplus? c.Does this represent perfect price discrimination? Why or why not?

Which of the following is a reason why a firm would not engage in price discrimination?

Which of the following statements is true?

Which of the following are necessary conditions for successful price discrimination? A.zero transactions costs B.a perfectly competitive market structure C.an imperfectly competitive market structure D.at least two different markets with different price elasticities of demand E.at least two different markets with different price elasticities of supply

When a firm charges $4.95 instead of $5.00,what do economists call this pricing strategy?

Article Summary Brandeis University economist Benjamin Shiller has written a paper which explains how Netflix could combine demographic data with customers' Web browsing habits to more accurately predict how much a customer would be willing to pay for a Netflix subscription,and how using this method of first-degree price discrimination would generate higher profits.Shiller explains that the more information a company has about its customers,the better it is at being able to set prices to increase profits.As he stated in his paper,"Using all variables to tailor prices,one can yield variable profits 1.39 percent higher than variable profits obtained using non-tailored 2nd degree price-discrimination.Using demographics alone to tailor prices raises profits by much less,yielding variable profits only 0.14% higher than variable profits attainable under 2nd degree [price discrimination]." -Refer to the Article Summary.If Netflix chose to use Shiller's pricing method