You Currently Sell the Same Product to Both Students and Faculty

question 92

Multiple Choice

You currently sell the same product to both students and faculty members, and are able to prevent transfer from one group to the other. Your current prices, quantities sold, and the absolute values of the slopes of the demand curves are as follows: Price Number sold Slope of demand curve Students $5 200 0.01
Faculty $10 30 0.40
If your marginal cost is $1 and you are interested in maximizing your revenues, how would you adjust your prices?

• A)Increase prices for both groups.
• B)Decrease prices for both groups.
• C)Increase student price and decrease faculty price.
• D)Decrease student price and increase faculty price.

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Definitions:

Signaling View

A perspective in economics that suggests an action taken by a party can reveal or signal information about that party to other parties, often seen in contexts such as education and employment markets.

Superstar

A superstar is a highly prominent or exceptionally talented person, especially in entertainment or sports, who commands a significant degree of public fascination and influence.

Simultaneously Provided Services

Services that are provided simultaneously are those that occur or are delivered at the same time to consumers.

Signaling Theory

A theoretical framework suggesting that people signal their ability or quality through actions or investments, which others interpret to make informed decisions.