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Suppose a Restaurant Is Trying to Determine How Much to Charge

Question 89
Essay

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?

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Q 90
Refer to Figure 16-3.Graph (a)represents a monopolist who cannot price discriminate and graph (b)represents a monopolist practicing perfect price discrimination.On each graph,identify the monopoly price,the monopoly output,the efficient output,and the areas representing profit,consumer surplus,and deadweight loss.
Q 91
Book publishers often use price discrimination across time to increase profits.Toni Morrison's book,A Mercy,was published as a hardcover edition in November 2008 at a price of $23.95.In August 2009,the paperback version was published at a price of $15.00.Assume that 100,000 hardcover books were sold to hard-core Toni Morrison fans in November 2008,and 400,000 paperback books were sold to casual readers in August 2009.Illustrate each of these situations graphically.Assume that the marginal cost of the hardcover version is $2.00 and the marginal cost of the paperback version is $0.75.
Q 92
Some firms practice odd pricing because A) they believe that customers will buy a larger quantity with an odd price. B) it is a way to price discriminate. C) it is too difficult for sellers to reeducate buyers into accepting even prices. D) it lowers transactions costs.
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