Question : 51) Some firms require consumers to pay an initial fee : 1387960

51) Some firms require consumers to pay an initial fee for the right to buy their product and an additional fee for each unit of the product they purchase. This practice is referred to as

A) odd pricing.

B) dual pricing.

C) a two-part tariff.

D) intertemporal pricing.

52) 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?

A) At one time, admission fees were charged at both parks but all rides were free. Disney has since changed its pricing policy; it earns higher profits by charging for both admission and rides.

B) At one time, customers had to pay for admission and rides at Disneyland and Disney World. Disney has since changed its pricing policy; it earns higher profits by charging for admission but not for rides.

C) At one time, customers had to pay for admission and rides at Disneyland and Disney World. Disney has since changed its pricing policy; it earns higher profits by charging for rides but not for admission.

D) At one time, fees for admission and rides at both parks were set at their profit-maximizing levels. Disney has since changed its pricing policy; it uses a cost-plus pricing strategy for admission and does not charge for rides.

53) The Walt Disney Company is in a position to use a two-part tariff policy in setting prices for admission and rides at Disney World. If this strategy resulted in maximum profit, Disney would convert all consumer surplus into profit. Which of the following explains why Disney does not maximize its profits from admission and rides?

A) To maximize its profits, Disney would have to know the demand curves of each of its customers. Since this is not possible, Disney is not able to convert all consumer surplus into profit.

B) Disney purposely charges less than the profit-maximizing price for admission to Disney World because it does not want to risk alienating its customers.

C) Disney purposely charges less than the profit-maximizing price for admission to Disney World in order to earn more profit from sales of food, lodging and other related services.

D) Disney does not charge the profit-maximizing price for admission because it wants to keep admission affordable for children who will be more likely to visit Disney World when they become parents.

54) Many golf courses charge members an annual membership fee as well as a fee each time they golf. One reason for this is

A) golf courses do not want their members to overuse their fairways. Charging for each round of golf played reduces fairway maintenance costs.

B) charging both fees allows the courses to transfer more consumer surplus into profit than charging only an admission fee.

C) charging both fees allows the courses to transfer more producer surplus into profit than charging only an admission fee.

D) research has shown that charging both fees increases the likelihood that golfers will renew their memberships.

55) Consider a discount retailer such as Costco which uses a two-part tariff pricing strategy. The Costco membership fee

A) buys the consumer the right to make future purchases at Costco.

B) is a resalable asset to the consumer.

C) is a resalable asset to the producer.

D) is used by Costco to cover its fixed costs of production.

Figure 16-6

Watanabe Sensei operates the only martial arts school in Hartfield. For simplicity, assume that consumers have identical demand curves and that Sensei knows what this demand curve is. Figure 16-6 shows this demand curve.

56) Refer to Figure 16-6.  If Sensei acts as a monopolist, his profit-maximizing price is ________ and the number of classes sold is ________.

A) P0; Q0

B) P0; Q1

C) P1; Q0

D) P1; Q1

57) Refer to Figure 16-6.  If Sensei acts as a monopolist and charges the profit-maximizing price, what is the consumer surplus received by his customers?

A) the area A + B + C + D

B) the area A + B + C + D + E

C) the area A + B

D) the area A + C + H

58) Refer to Figure 16-6.  If Sensei acts as a monopolist and charges the profit-maximizing price, what is his producer surplus?

A) the area B + D + G

B) the area A + B + C + D + H + G

C) the area C + D + H + G

D) the area A + C + H

59) Refer to Figure 16-6.  Sensei’s friend, Marcel, suggests that he charge a one-time membership fee to use the martial arts school, in addition to a per-class charge. Suppose Sensei charges the monopoly price for each class and also imposes a one-time membership fee. What is the maximum amount of revenue from the membership fee he can collect from all his customers?

A) an amount equal to the area A + B

B) an amount equal to the area E + F

C) an amount equal to the area H + G

D) an amount equal to the area A + C + H

60) Refer to Figure 16-6.  With a two-part pricing scheme—a monopoly price for classes and a one-time membership fee—what is the amount of producer surplus Sensei will earn?

A) an amount equal to the area A + B + C + D

B) an amount equal to the area E + F

C) an amount equal to the area A + C + H

D) an amount equal to the area A + B + C + D + H + G