Exam 16: Pricing Strategy

Potential Customer Willingness to Pay (dollars per hour) Arun \ 8 Bernice 9 Cara 10 Dawn 12 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.If Julie charges $10 per hour,what is the value of the consumer surplus received by Dawn?

Potential Customer Willingness to Pay (dollars per hour) Arun \ 8 Bernice 9 Cara 10 Dawn 12 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?

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

Under what circumstances will the law of one price hold,and when might it not hold?

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 charges a single price of Pd for each performance.Which of the following statements is true?

COMPANY PRICE Amazon.com \ 13.47 BarnesandNoble.com 16.23 Walmart.com 13.47 Rakuten.com 17.15 Table 16-1 shows the price for the hardcover version of the novel The Girl on the Train by Paula Hawkins at four online bookstores. -Refer to Table 16-1.Which of the following can one conclude from the data above?

The collection and analysis of massive amounts of data,with the goal of measuring aspects of people's behavior is referred to as

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

Suppose the per-unit production cost of a book is $4.00 and the retail price is $32.If the book publisher sells books to a bookstore at a 40 percent discount,what is the amount of the publisher's markup per book? Assume that bookstores sell books at the retail 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 monopoly price.What is the profit earned under this pricing scheme?

Book publishers often use a cost-plus pricing strategy.One reason for this is

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?

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 quantity it should produce?

Insurance companies typically charge women lower prices than men for automobile insurance.Is this an example of price discrimination?

Which of the following does not arise from price discrimination?

Delaware and North Dakota have identical state gasoline taxes of 23.0 cents per gallon.When added to the federal gasoline tax of 18.4 cents per gallon,the total tax on one gallon of gasoline in these two states is 41.4 cents.On November 8,2015,the average price of one gallon of regular gasoline was $2.17 in Delaware and $2.28 in North Dakota.Briefly explain whether this is an example of price discrimination.Assume that the gasoline being sold is identical in both states. Sources: gaspricewatch.com and taxfoundation.org

Suppose Dublin Electronics charges regular customers $90 for a Blu-ray player but allows senior citizens to purchase the same item for $75.Is this likely to be a successful price discriminating strategy?

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

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

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