Exam 16: Pricing Strategy

An article on how prices in South Bend, Indiana rise during Notre Dame home football games noted: "For the Sept.16 game against the University of Michigan, the South Bend Marriott is charging $649 a night for a double room....The Marriott's regular weekend price is $149 a night." Source: Ilan Brat, "Notre Dame Football Introduces Its Fans To Inflationary Spiral," Wall Street Journal, September 7, 2006, p.A1. Which of the following statements is true?

Differentiating products to suit customers' tastes is a form of price discrimination.

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?

Price discrimination is possible in which of the following market structures? A.perfect competition B.monopoly C.oligopoly D.monopolistic competition

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?

Movie theaters often charge different people different prices for admission.Why don't theaters charge different prices for popcorn and other food items?

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.If Sensei charges the competitive price for his classes, what is the maximum amount of admission fee that he can collect from his customers?

With an optimal two-part tariff

Early adopters are consumers who will pay a high price to be among the first to own new products.

Compared to monopoly pricing, an optimal two-part tariff

Consider the following pricing strategies: A.perfect price discrimination B.charging different prices to different groups of customers C.optimal two-part tariff D.single-price monopoly pricing Which of the pricing strategies allows a producer to capture the entire consumer surplus that would have gone to consumers under perfect competitive pricing?

Toot Sweets Bakery sells freshly baked muffins from 6.30 am at $1.20 per muffin.By 4 pm, the remaining muffins are marked down to $0.60 each.Which of the following statements is true?

Erin and Deidre, two residents in 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.Whose demand curve for air travel is likely to be more elastic?

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?

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?

If a monopolist engages in first-degree price discrimination, it will produce the same output level as a perfectly competitive industry.

Consider three pricing strategies that the firm can pursue: A.optimal two-part tariff pricing B.perfect price discrimination C.single-price monopoly pricing Of these three strategies, which is most beneficial to society as a whole?

Most supermarkets charge the same price for the majority of goods sold.This suggest that

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?

The expenses you encounter when you buy in one market and sell in a distant market are known as