Exam 16: Pricing Strategy

Clarissa Kessler operates a store that sells recorded music.Her business suffered tremendously when a giant discount store chain opened a store in the area and is able to sell its products for less than Clarissa's wholesale cost.Is this evidence of illegal price discrimination on the part of the discount store chain?

Though large firms have the knowledge and resources to utilize a better pricing strategy,many choose to use cost-plus pricing.One reason for this is that

Bubba's Hula Shack bar and bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill.All else equal,customers who arrive by public transportation to take advantage of Bubba's Hula Shack discount have a ________ for the services of the establishment than customers who drive to the establishment.

What is meant by the "law of one price"? In discussing the law of demand,Hubbard and O'Brien claim there has been no evidence of an exception to the law (that is,no evidence of an upward-sloping demand curve).Are there exceptions to the law of one price?

What is cost-plus pricing? Why do some firms use cost-plus pricing even when the firms' managers have the resources to devise a pricing strategy that would result in greater profits?

Netflix,an online DVD rental service,engages in price discrimination by separating its customers into two groups: those who have a relatively elastic demand and those who have a relatively inelastic demand for DVD rentals.Those who have a relatively elastic demand are customers who

Entrepreneurs who earn arbitrage profit are able to do so by extracting the total consumer surplus from buyers.

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

Harvey Morris bought dishes and pitchers made of blue glass during the Great Depression at a flea market.He later resold these items on eBay.The profits Harvey earned from these sales are

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

What is meant by the "law of one price"?

When firms price their products by adding a percentage markup to their average costs of production,this is called

Many firms use odd pricing - charging prices such as $.99 instead of $1.00 and $9.99 instead of $10.00.One reason for this pricing strategy is that consumers will somehow believe that the difference in price appears to be greater than it actually is.Researchers conducted consumer surveys to determine whether this is actually the case.What was the result of these surveys?

Harry attended a baseball card show in New York City where he bought a number of rookie cards of Pittsburgh Pirates baseball players from the 1950s and 1960s.Harry then sold the cards in Pittsburgh,Harry's hometown,where he knew the cards sold for higher prices.The profits Harry earned from these transactions are called

Many colleges and universities practice yield management to maximize the revenue they receive from tuition and

Figure 16-3 The Lizard Lounge is well known for its exotic cocktails.Figure 16-3 shows its estimated demand curve for cocktails. -Refer to Figure 16-3.The owners of the Lizard Lounge are considering the following four pricing options: a.A single price scheme where the cocktail price equals the monopoly price. B.A single price scheme where the cocktail price equals the competitive price. C.A two-part tariff: a monopoly price for cocktails and a cover charge that will generate total revenue equal to the area X. D.A two-part tariff: a competitive price for cocktails and a cover charge that will generate total revenue equal to the area X + Y + Z. Under which scheme are the Lounge customers better off?

Assume that a monopolist practices perfect price discrimination.The firm will produce an output rate

Table 16-1 Julie plans to start a pet-sitting service.She surveyed her neighborhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 16-1 below shows a portion of her survey results. -Refer to Table 16-1.Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay.What is Julie's total revenue and how many hours of service will be purchased?

College students and faculty members have a more elastic demand than the general public for Apple's iMac desktop computers.From this we can conclude that

If a monopolist practices perfect price discrimination,