The publisher of an online Economics Primer course is trying to sell the primer to a group of MBA students and a group of EMBA students in the US. The maximum willingness to pay for the primer in each group of students as well as the number of students in each group is given in the table. (Assume Executive MBA students tend to have their tuition paid by employers and MBA students tend to pay the costs out of their own resources). Assume the marginal cost is $50.

Willingness to pay Number of Students

EMBA 300 1000

MBA 100 2000

What is (are) the publisher's profit maximizing price(s)?

	a.	Charge $300 to EMBA and $100 to MBA
	b.	Charge either $300 or $100 (the publisher is indifferent)
	c.	Charge a uniform price of $300
	d.	Charge a uniform price of $100

Using the same information as above, suppose you can set one price for MBA students and one price for EMBA students. However you know that MBA students are willing to resell the Primer to EMBA students for their purchase price plus $60. MBA students pay $x and they can resell the primer for $(x + 60). Assuming there are no other cost involved in this transaction and it cannot be prevented. What are the optimal prices for the two groups of students?

	a.	Charge $300 to EMBA and $240 to MBA
	b.	Charge $240 to EMBA and $100 to MBA
	c.	Charge $240 to EMBA and $240 to MBA
	d.	None of the above

Using the same information as above, suppose you cannot distinguish between the two groups of students. However if you offer a rebate, you know that the EMBA students will never redeem the rebate while MBA students will always redeem the rebate. What is the optimal full price for the Primer and Optimal rebate?

	a.	Charge $300 for the primer and offer $200 for the rebate
	b.	Charge $300 for the primer and offer $100 for the rebate
	c.	Charge $300 for the primer and do no offer any rebate
	d.	Charge $100 for the primer and do not offer any rebate

What economic concepts are being illustrated in questions 17 and 18 respectively?

	a.	Indirect price discrimination and direct price discrimination
	b.	Direct price discrimination and indirect price discrimination
	c.	Direct price discrimination and bundling
	d.	Both are testing on indirect price discrimination

Answer rating: 100% (QA)

First scenario Sell it for 300 to EMBA students and for 100 to ... View the full answer