Exam 16: Pricing Strategy

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?

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 are the total profits from both markets combined?

Cost-price pricing typically does not result in profit-maximization.As a result,economists have two views of cost-plus pricing.One of these views is

Cost-plus pricing may be a reasonable way to determine price when

Transactions costs refer to

Because each customer pays according to her willingness to pay,a consumer maximizes her consumer surplus under first-degree price discrimination.

Which of the following firms is most likely to use cost-plus pricing?

One reason why McDonald's charges a single price for its products is that it is difficult and costly for the company to determine each individual consumer's willingness to pay.

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 price discrimination occurs in a market

The Walt Disney Company is in a position to use a two-part tariff by charging for admission and also charging for rides inside its two theme parks,Disneyland and Disney World.Which of the following statements regarding Disney's pricing strategy is true?

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost,the efficient level of output.

Though large firms have the knowledge and resources to utilize a better pricing strategy,many choose to use cost-plus pricing.One reason for this is that

Figure 16-1 -Refer to Figure 16-1.What is the economically efficient output level?

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

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?

With perfect price discrimination,the marginal revenue curve

Many colleges and universities practice yield management to maximize the revenue they receive from tuition and

Price discrimination is a rational strategy for a profit-maximizing firm when

Figure 16-5 -Refer to Figure 16-5.Suppose the firm represented in the diagram decides to act as a monopolist and charge a single price.What is the profit maximizing quantity produced and what is the price charged?