Exam 16: Pricing Strategy

Figure 16-3 -Refer to Figure 16-3.Graph (a)represents a monopolist who cannot price discriminate and graph (b)represents a monopolist practicing perfect price discrimination.On each graph,identify the monopoly price,the monopoly output,the efficient output,and the areas representing profit,consumer surplus,and deadweight loss.

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.

Compared to monopoly pricing,an optimal two-part tariff

Figure 16-4 -Refer to Figure 16-4.Consider the following two pricing strategies: a.a fixed fee and a per-unit price equal to the monopoly price B.a fixed fee and a per-unit price equal to the competitive price The firm represented in the diagram earns a higher profit under strategy ________ and deadweight loss is eliminated under ________.

Price discrimination

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

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? A) Both perfect price discrimination and a two-part tariff pricing are equally beneficial in that the marginal benefit of the last unit sold equals the marginal cost of producing that unit. B) only perfect price discrimination because this pricing method eliminates deadweight loss C) single-price monopoly pricing because consumers enjoy at least some consumer surplus D) only two-part tariff pricing because the per-unit portion of the price is set equal to marginal cost

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

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 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?

Which of the following are necessary condition(s)for successful price discrimination? a.zero transaction cost B)a perfectly competitive market structure C)an imperfectly competitive market structure D)at least two different markets with different price elasticities of demand E)at least two different markets with different price elasticities of supply A) a, b, and d only B) c and d only C) a, c, d and, e only D) a and c only

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.

The University of Kansas is offering football fans the chance to purchase equity seat rights in order to guarantee season ticket seats and prices for home games for 30 years.This is an example of

According to a New York Times article,shoppers from New York City have played a game of "retail arbitrage" by shopping at malls in Northern New Jersey,a state where there is no tax on clothing and shoes.Even after accounting for transaction costs,shoppers could still save money on their clothing and footwear purchases. Source: Ken Belson and Nate Schweber,"Sales Tax Cut in City May Dim Allure of Stores Across Hudson," New York Times,January 18,2007. Is the term "arbitrage" correctly used here?

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.Suppose Plato Playhouse price discriminates.Which of the following statements is true?