Exam 16: Pricing Strategy

Dell Computers allows potential consumers to customize personal computers to their desires.Dell's strategy is successful because offering bundles that more exactly meets a consumer's preference allows Dell to extract more consumer surplus.

Figure 16-2 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 16-2 shows this demand curve. -Refer to Figure 16-2.Suppose instead of charging the monopoly price for his classes,Sensei charges the competitive price.What is the competitive price and what is the quantity demanded at this price?

Why might an amusement park switch from charging admission to the park and charging for the rides to charging for admission but not charging for the rides?

If price discrimination occurs in a market,

Figure 16-2 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 16-2 shows this demand curve. -Refer to Figure 16-2.If Sensei acts as a monopolist and charges the profit-maximizing price,what is the consumer surplus received by his customers?

Why might a producer practice price discrimination?

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 charges $7 per hour.What is her marginal revenue?

"Buy low and sell high is advice given to people who want to make a profit by buying and selling shares of stock.Arbitrage is defined as buying a product in one market at a low price and reselling it in another market at a high price.Therefore,when stock brokers buy and sell stocks to earn a profit they are engaging in arbitrage." Evaluate this statement; state whether it is true or false and explain your answer.

The term "early adopters" refers to

The Walt Disney Company is in a position to use a two-part tariff by charging for admission and also charging for rides inside its two theme parks,Disneyland and Disney World.Which of the following statements regarding Disney's pricing strategy is true?

According to the law of one price,identical products should sell for the same price everywhere if

There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.

Your text refers to airlines as "The Kings of Price Discrimination." Why is price discrimination common in the airline industry?

If,at a firm's projected sales level,the marginal cost is $125,the average cost is $150 and the markup is 20 percent,then its selling price is