Exam 16: Pricing Strategy

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 Julie's total revenue and how many hours of service will be purchased?

In which market structure is it not possible to practice price discrimination?

When Disneyland opened in 1955, what prices were charged for admission and rides?

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 charges $7. What is the value of the consumer surplus enjoyed by her customers?

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

What is odd pricing? Why do some merchants use odd pricing?

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

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

Figure 16-7 The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its estimated demand curve for cocktails. -If marginal costs differ quite substantially from average total costs, then using a cost-plus pricing schedule will not lead to the profit maximizing price.

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 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 quantity it should produce?

A firm using a two-part tariff can produce the economically efficient outcome by

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

Figure 16-7 The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its estimated demand curve for cocktails. -A two-part tariff refers to a pricing schedule under which a buyer must pay a fixed fee for the right to purchase the product, in addition to a per-unit price.

A firm that engages in price discrimination must be able to identify the preferences of every customer it serves.

The Walt Disney Company is in a position to use a two-part tariff policy in setting prices for admission and rides at Disney World. If this strategy resulted in maximum profit, Disney would convert all consumer surplus into profit. Which of the following explains why Disney does not maximize its profits from admission and rides?

If marginal cost is zero, with an optimal two-part tariff,

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?

Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase. This practice is referred to as

For a firm that can effectively price discriminate, who will be charged a lower price?

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 value of the consumer surplus from this pricing strategy?