6) Netflix is making two versions of its subscription plans (4K and FHD), which target consumers with high and low willingness to pay, as given in the table below. If there is zero marginal cost for the firm in both versions, what should be the incentive compatible second degree discriminated prices? Is this profit maximizing? Willingness to pay ($) Consumer 4K FHD High WTP Low WTP 60 20 20 10

6) Netflix is making two versions of its subscription plans (4K and FHD), which target consumers with high and low willingness to pay, as given in the table below. If there is zero marginal cost for the firm in both versions, what should be the incentive compatible second degree discriminated prices? Is this profit maximizing? Willingness to pay ($) Consumer 4K FHD High WTP Low WTP 60 20 20 10

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 7CQ

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6) Netflix is making two versions of its subscription plans (4K and FHD), which target consumers with high and low willingness to pay, as given in the table below. If there is zero marginal cost for the firm in both versions, what should be the incentive compatible second degree discriminated prices? Is this profit maximizing? Willingness to pay ($) Consumer High WTP Low WTP 4K FHD 60 30 25 20
itle A reliable 15-year-old babysitter can be a price maker within her own neighborhood. Suppose that th Description A reliable 15-year-old babysitter can be a price maker within her own neighborhood. Suppose that this babysitter wishes to implement a Multipart Pricing Plan. Customers who use her services less than L hours per month will pay a high price of PH dollars per hour. Customers who use her services more than L hours per month will still pay PH dollars for the first L hours, but for any additional hours they can then pay the lower price PL dollars per hour which she will generously set equal to her marginal cost. Assume that market demand is QD = 60 – 10P and her total costs are C = 3Q; so PL = $3 per hour. If she set her high price at $4 per hour, would her customers accept a limit of L = 24 hours per month in order to use the remainder of her services at a price of $3 an hour? Provide a labelled diagram and briefly explain. Suppose that this talented babysitter was…
O Macmillan Learning Suppose that a small-town theater has six potential customers and is looking to implement price discrimination depending on when customers want to attend. Suppose the marginal cost of serving an additional customer is $1.50. The data provide information about the time of attendance and willingness to pay for a ticket. Customer Maximum willingness to pay Time of attendance Brandon $2 matinee Tyler $30 evening Austin $15 evening Alexis $6 matinee Ashley $20 evening Emily $14 matinee What should the theater charge for evening tickets? What should the theater charge for matinee tickets? $
11. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $100 per round trip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per night Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. оп апy Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field…
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Fun Water Park is considering practicing price discrimination in respect of its customers who are either members or non-members. Assume that the marginal cost (MG) for both groups of customers is constant. The Figure Q3(a) and Q3(b) shows the markets for the Fun Water Park. RM/ Cost RM/ Cost 150 100 100 80 MC 50 MC 50 ARI MR `ARI MRI 10 20 40 Quantity 10 30 50 Quantity Figure Q3(a): Members market Q3(b): Figure members market non- i) Determine the price and quantity to profit maximizing in each market. ii) Calculate the profit for both members market, and non-members market, given that MC is equal to AC.
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A manufacturer of icrowaves has discovered that male shoppers have little value for microwaves and attnbute almost no exxtra value to an auto- defrost feature. Female shoppers generally value microwaves more than men do and attribute greater value to the auto-defrost feature. There is little additional cost to incorporating an auto-defrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer is considering introducing two different models. The manufacturer has determined that men value a simple microwave at $68 and one with auto-defrost at $82, while women value a simple microwave at $82 and one with auto-defrost at $150. Suppose the manufacturer is considering three pricing strategies: 1. Market a single microwave, with auto-defrost, at $82, to both men and women. 2. Market a single microwave, with auto-defrost, at $150, to only women. 3. Market a simple microwave to men, at $68. Market a microwave, with auto-defrost, to women at $135.…
Suppose that the demand curve for movies for college students is Q, = 80 - 1.00p 100 and for other town residents is 90- 80 Q2 = 20 - 0.25p. 70- The town's total demand curve is 60 50- E 40- 30- 20 60 Q, Movies 20 40 80 100 120 System Preferences www 1 tv 30 MacBook Air DII DD 80 F10 F9 F8 esc F7 F5 F6 F1 F2 F3 @ 23 $ 2 3 4 5 7 9 1 Q W R Y U P. Price per movie * CO