Exam 16: Pricing Strategy

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.

Which of the following statements about two-part tariffs is false?

Table 16-2 Neem Products sells its Ayurvedic Neem toothpaste in two completely isolated markets with demand schedules as shown in Table 16-2. The average cost of production is constant at $2 per tube. -Refer to Table 16-2. Which of the following statements is true about the two markets?

Figure 16-7 The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its estimated demand curve for cocktails. -Refer to Figure 16-7. 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 cocktail price and a cover charge that will generate total revenue equal to the area X. D. A two-part tariff: a competitive cocktail price and whatever cover charge that will generate a total revenue equivalent to the area X + Y + Z. Which pricing scheme(s) achieve the economically efficient outcome?

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?

Figure 16-6 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. Sensei's friend, Marcel, suggests that he charge a one-time membership fee to use the martial arts school, in addition to a per-class charge. Suppose Sensei charges the monopoly price for each class and also imposes a one-time membership fee. What is the maximum amount of revenue from the membership fee he can collect from all his customers?

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

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?

Figure 16-2 Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers: students and the non-student population. Figure 16-2 shows the demand curves for the two groups of customers. -Refer to Figure 16-2. Suppose Plato Playhouse price discriminates. Which of the following statements is true?

Joss is a marketing consultant. Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report. Iris is willing to pay $500 for the service while Daphne is willing to pay $800. Suppose that the opportunity cost of Joss's time is $1,200. Assume that Iris and Daphne do not know each other. If the price is $800 per copy,

Which of the following are necessary condition(s) for successful price discrimination? a. zero transaction cost 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

For many products, such as fast foods, a variety of prices can be found, but sellers with higher prices can expect to sell their products because

Charging different prices to different consumers for the same product when the price differences are not due to differences in cost is called arbitrage.

Today, Walt Disney World charges different customers different prices for admission. This pricing strategy is called

Table 16-3 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 16-3 above shows a portion of her survey results. -Refer to Table 16-3. 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 the value of consumer surplus by her customers?

Which of the following is necessary in order for a firm to successfully practice price discrimination?

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

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 competitive price. (This is also called an optimal two-part tariff.) What is the per-unit price it should charge, if any?

Arbitrage refers to the act of

Joss is a marketing consultant. Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report. Iris is willing to pay $500 for the service while Daphne is willing to pay $800. Suppose that the opportunity cost of Joss's time is $1,200. Assume that Iris and Daphne do not know each other. If Joss charges the same price per copy to both Iris and Daphne,