Exam 16: Pricing Strategy

Erin and Deidre, two residents of Ithaca, New York, are planning a trip to Boston. Erin, the sales manager for a large retailer, has to attend a business meeting. Deidre, a college student on vacation, is planning a leisurely trip to visit friends and relatives. Which of the following statements is true?

If the selling price of a firm's product is $200 and the estimated average cost of producing this product is $150, what is the firm's markup?

Many golf courses charge members an annual membership fee as well as a fee each time they golf. One reason for this is

Yield management is the practice of

Both first-degree price discrimination and optimal two-part tariff pricing maximize economic surplus.

Table 16-1 Table 16-1 shows the price for the hardcover version of the novel Inferno by Dan Brown at four online bookstores. -Refer to Table 16-1. Which of the following can one conclude from the data above?

With an optimal two-part tariff,

The Bay Area subway system, BART, offers senior citizens discounted fares for BART rides. This suggests that BART authorities believe that senior citizens have a ________ demand for subway rides.

Book publishers use price discrimination routinely, but the form of price discrimination they use is different from the form used by airlines and other industries. Explain.

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. What is the total revenue received from both markets combined?

Firms engage in odd pricing when they charge prices that appear to be less than they really are; for example, charging a price of $4.95 instead of $5.00 and $.99 instead of $1.00. How have researchers tried to determine whether odd pricing is successful in convincing consumers that odd prices are less than they really are?

Draw a graph that shows producer surplus, consumer surplus, and deadweight loss in a market where the seller practices perfect price discrimination. Be sure to identify the demand curve, the marginal revenue curve, the marginal cost curve, and the profit maximizing quantity on the graph.

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. 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?

Which of the following is not a requirement for a successful price discrimination strategy?

If, at the firm's projected sales level, the marginal cost is $40, the average cost is $50 and the markup is 30 percent, then its selling price is

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?

Most movie theatres charge different prices to different groups of customers for movie admission but not on movie popcorn. Which of the following is a reason for this?

A price-discriminating firm charges the highest price to

The act of buying a product at a low price in one market and reselling the product at a higher price in another market is called arbitrage.

All of the following are disadvantages of cost-plus pricing except