Managerial Economics - Chapter 14 -
Indirect Price Discrimination Exam
Questions With Correct Answers.
Indirect price discrimination requires - answeridentifying some potential product feature that is
correlated with value
Business travellers value first-class tickets at $2,000 and coach ticke...
Indirect price discrimination requires - answer✔identifying some potential product feature that is
correlated with value
Business travellers value first-class tickets at $2,000 and coach tickets at $1,000. If coach tickets
are currently priced at $400, what should be the price of the first-class ticket? - answer✔$1,399
A razor blade manufacturer gives away razors for free but charges a very high price for the razor
blades. What must be true for this metering strategy to be profitable? - answer✔Higher value
consumers use more blades than lower value consumers.
Which of the following can take advantage of the fact that a coffee shop's customers value each
successive cup of coffee less than the previous cups.
a. Offer unlimited coffee for a single price with free refills.
b. Sell a "souvenir cup" with the price of refills equal to the shop's marginal cost.
c. Have a "frequent customer" program with a 10% discount on your second purchase each day,
d. 20% discount on your second purchase, and so on.
e. All of the above - answer✔e. All of the above
Bundling two products is likely to increase profit when - answer✔customers who highly value
one product have a relatively low value for the other product.
A car manufacturer is considering selling a "standard" and a "deluxe" version of an automobile.
The manufacturer has identified two equally sized consumer segments. Their values are given in
the table below. The marginal cost of both versions is $10,000. Which is the most profitable
strategy.
Version/Consumer A/Consumer B
Standard/$25,000/$35,000
Deluxe/$28,000/$50,000 - answer✔Price the standard version at $25,000 and the deluxe version
at $40,000
A car manufacturer is considering selling a "standard" and a "deluxe" version of an automobile.
The manufacturer has identified two equally sized consumer segments. Their values are given in
the table below. The marginal cost of both versions is $10,000. Which, priced appropriately, is
the most profitable strategy.
Version/Consumer A/Consumer B
Standard/$25,000/$45,000
Deluxe/$30,000/$50,000 - answer✔Sell only a deluxe version.
Which of the following is true about selling a standard and a deluxe version of a product targeted
to different segments of customers? - answer✔The price of the deluxe version may need to be
reduced when introducing a standard version.
Which of the following is an example of indirect price discrimination? - answer✔An early bird
special at a restaurant before 6 pm.
Half of a fast food restaurant's consumers value the Signature Sandwich at $3 and the Tater Fries
at $2. The other half value the Signature Sandwich at $1 and the Tater Fries at $3. Marginal costs
are zero. What are the restaurant's total profits (per customer) without bundling (selling each
item separately at its own price) and with bundling (selling both items together for a single
price). - answer✔$3.50 with bundling; $4.00 without
Suppose Mattel, the producer of Barbie dolls and accessories (sold separately), has two types of
consumers who purchase its dolls: low-value consumers and high-value consumers. Each of the
low-value consumers tends to purchase one doll and one accessory, with a total willingness to
pay of $80. Each of the high-value consumers buys one doll and two accessories and is willing to
pay $155 in total.
Mattel is currently considering two pricing strategies:
• Strategy 1: Sell each doll for $40 and each accessory for $40
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