Exam 16: Pricing Strategy

Arnold's Airport Transport provides passenger transportation to and from the local airport.Arnold charges a flat rate of $30 per person for round-trip service,and he gives a $5 discount to senior citizens.Assume Arnold's marginal cost is $3.00 per person.Draw two graphs,one showing demand and marginal cost for his $30 customers,of which he has 300 per month,and the other graph showing demand and marginal cost for his senior citizen customers,of which he has 100 per month.If Arnold charged all of his customers $30,he would have 325 customers per month.

What is the difference between price discrimination and other forms of discrimination?

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

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,

In 2009,Netflix was charging $16.99 per month to rent three DVDs at a time.Although all subscribers under this plan pay the same rate,they do not receive the same quality of service.Subscribers who rent the fewest movies per month have the best chance of receiving the latest releases (for which there is usually a wait list)and will typically receive their DVDs faster.Based on the information above,what can you conclude about the price elasticity of demand for Netflix DVD rentals?

Figure 16-1 -Refer to Figure 16-1.With perfect price discrimination,the firm will produce and sell

A firm's efforts to increase profit by price discrimination can be undermined by

Cost-plus pricing is a reasonable way to determine the optimal price when

Which of the following statements is true about optimal two-part tariff and perfect price discrimination for a given demand curve?

The law of one price states that identical products should sell for the same price everywhere as long as transactions costs are zero.

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

One method of setting price using the cost-plus method is to add

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.What is the price charged in the two markets?

When you buy at a low price in one market then sell at a higher price in another market you are engaging in

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

Which of the following statements is true?

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

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.

Figure 16-4 -Refer to Figure 16-4.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 per-unit price?

If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations,then it is engaging in