Question

ts product at different price), it is engaging in ing. quality-adjusted pricing c. price differentiation. d. price discrimination ANS: D PTS: I Prige discrimination TOP: DIF: I MSC: Definitional REF: 15-5 Sceyario 15-3 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market arca. V Let's assume that Black Box Cable pays $150.000 a vear for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are Iwo types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as S150 a year for the new PMC premium channel. Second, the PMC channel will appeal to about 20,000 occasional TWtewers who will pay as much as $20 a year for a subscription to PMC. 29. Refer to Scenario 15-3. If Black Box Cable TV isunableo price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit? a. price - $20, profit - $400,000 b. price S20: profit 5330,000 C. price S150: profit $450,000 d. price SI50: profit- S600,000 HC=0 $20. $150 4000 The boo,000 4 50,00 REF 15-5 DIF 2 20,000 PTS: 1 MSC: Applicative ANS: C TOP: Price discrimination 4 o 0000 Pice= 25000 (Pi=

Answer 1