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Exam 16: Pricing Strategy

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Question 31

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

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Discrimination based on race or gender a...

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Question 32

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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.

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Question 33

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Arbitrage

The process of rapidly adjusting prices based on information gathered on consumers' preferences and their responsiveness to changes in price is called

There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.

The law of one price states

Bubba's Hula Shack bar and bistro has begun giving customers who can show proof that they arrived at the establishment by public transportation a 10 percent discount on their total bill.This is an example of

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

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 total revenue it can expect to collect from the fixed fee portion of the price?

Suppose a restaurant is trying to determine how much to charge for a bowl of chili,and decides to run an experiment to see how much its customers are willing to pay by allowing them to set their own price for this menu item. a.Is charging a customer the price he or she is willing to pay for the bowl of chili an example of price discrimination? Briefly explain. b.What is it called when a firm knows every consumer's willingness to pay,and can charge every consumer a different price? What happens to consumer surplus in this situation?

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 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?

Dell Computers allows potential consumers to customize personal computers to their desires.Dell's strategy is successful because offering bundles that more exactly meet a consumer's preference allows Dell to extract more consumer surplus.

The term "early adopters" refers to

$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Potential } \\\text { Customer }\end{array} & \begin{array} { c } \text { Willingness to } \\\text { Pay (dollars per } \\\text { hour) }\end{array} \\\hline \text { Arun } & \$ 8 \\\hline \text { Bernice } & 9 \\\hline \text { Cara } & 10 \\\hline \text { Dawn } & 12 \\\hline\end{array}$ 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 the value of consumer surplus by her customers?

Which of the following undermines a firm's ability to engage in price discrimination?

Which of the following will prevent firms from engaging in price discrimination?

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

Many book publishers use cost-plus pricing to establish prices for some of their books.Would you expect a publishing company to use a strict cost-plus pricing system for all its books? How might you determine if a publishing company actually does use cost-plus pricing for all its books?

To successfully price discriminate,a firm must ensure that there are no opportunities for arbitrage.