EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Question
Chapter 8.5, Problem 1TTA
To determine
To find: Whether the complicated discounted price scheme really make consumers better off or they are just the ways to increase profits.
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GameZone, a video games store, is considering the best way to price two new games – a first-person shooter (FPS) and a racing game. There are four types of consumers that might buy the games with roughly equal numbers of each type, and their willingness to pay (WTP) for each game is detailed in the table below (assume that the willingness-to-pay for a second game of the same type is zero). How should Gamezone price the two games separately to maximise revenue? How should Gamezone price a bundle of both games to maximise revenue? Is there an alternative (involving bundling) that generates more revenue than either single prices or a bundle alone? Under what condition/s is bundling likely to increase profits for a firm?
Consumer Type
WTP for FPS game
WTP for racing game
A
$120
$70
B
$70
$120
C
$160
$10
D
$10
$160
Caroline and Frances are debating the pricing strategy of several airlines. Caroline argues, “When airlines restrict discounted tickets to people who book well in advance and stay over on a Saturday, it is not price discrimination, because the restrictions have nothing to do with individual buyers' willingness to pay.” However, Frances says, “The airlines' stay-over restrictions are a form of price discrimination, because they roughly split the market into two separate groups that are willing to pay two different amounts.”
Economists generally agree with who?
I stumble on questions like this...
Suppose a firm is charging $8 for the first six-pack of cola and $4 for the second six-pack of cola. This firm is using
Multiple Choice
third-degree price discrimination.
first-degree price discrimination.
second-degree price discrimination.
first-, second- and third-degree price discrimination.
Chapter 8 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 8.3 - Prob. 1MQCh. 8.3 - Prob. 2MQCh. 8.3 - Prob. 1.1MQCh. 8.3 - Prob. 2.1MQCh. 8.4 - Prob. 1TTACh. 8.4 - Prob. 2TTACh. 8.4 - Prob. 1MQCh. 8.4 - Prob. 2MQCh. 8.5 - Prob. 1TTACh. 8.5 - Prob. 2TTA
Ch. 8.5 - Prob. 1.1TTACh. 8.5 - Prob. 2.1TTACh. 8.5 - Prob. 1MQCh. 8.5 - Prob. 2MQCh. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 6RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - Prob. 10RQCh. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Prob. 8.3PCh. 8 - Prob. 8.4PCh. 8 - Prob. 8.5PCh. 8 - Prob. 8.6PCh. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10P
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Similar questions
how much should the store charge for each rental if it engages in optimal two-part pricing?
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What is the Difference between predatory pricing, tie-in sales, and bundling?
At what Price should All Firms Produce at?
What should a Firm do for Pricing if it faces Elastic or Inelastic Demand?
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Q5) Distinguish between marginal pricing and cost-plus pricing.
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What is the difference between bundle pricing and random pricing?
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Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount.
Group A Group B
(sales per week) (sales per week)
Volume of sales before
the 10% discount 1.55 million 1.50 million
Volume of sales after
the 10% discount 1.65 million 1.70 million
Using the midpoint method, calculate the price elasticities of demand for group A and group B.
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Using the following graph that presents the demand, marginalrevenue, and relevant costs for your product, determine your firm’s optimal price,output, and the resulting profits for each of the following scenarios:
a.You charge the same unit price to all consumers.b. You engage in perfect price discrimination.c. You engage in two-part pricingJust for each scenario calculate from the graph i) optimal prizeii) optimal quantityiii) Profit
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Amazon.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Amazon.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount.
Group A (sales per week)
Group B (sales per week)
Vol. of sales before 10% discount
1.55M
1.50M
Vol. of sales after 10% discount
1.65M
1.70M
Using the midpoint method, calculate the price elasticities of demand for group A and group B.
Explain how the discount will affect total revenue from each group.
Suppose Amazon.com knows which group each customer belongs to when he logs on and can choose whether or not to offer the 10% discount. If Amazon.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
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Changes in net revenue from price discrimination
Consider the market for airline tickets on Flying High Airlines from Los Angeles to Chicago. The following graph shows the demand curve, marginal revenue (MR) curve, and marginal cost (MC) curve for this particular flight. In particular, the cost of adding another passenger to an otherwise empty seat is constant at $150. For simplicity, assume throughout this question that there are no supply constraints caused by seating capacity limitations.
Suppose Flying High Airlines sells each seat on the plane for the same price.
Place the purple point (diamond symbol) on the graph at the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. Then, place the grey rectangle (star symbols) to shade the area representing net operating revenue at the profit-maximizing price and quantity.
Suppose now that Flying High Airlines discovers that business travelers’ demand for airline tickets is more inelastic…
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A nightclub manager realizes that demand for drinks is more elastic among students, and is trying to determine the optimal pricing schedule. Specifically, he estimates the following demands: • Under 25: qr = 18 − 5p • Over 25: q = 10 − 2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the nightclub $4 each. (a) Calculate the market demand.
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