The Athenian Theatre Sells Play Tickets for the Same Play

question 156

Multiple Choice

The Athenian Theatre sells play tickets for the same play at different prices: a lower price to those who opt for the seats at the back of the theatre and a higher price for those who purchase seats in the front, around the stage. Which of the following statements is true?

• A) This is an example of product differentiation but not price discrimination.
• B) The theatre practices first-degree price discrimination by setting prices based on willingness to pay.
• C) Since the cost of producing the play does not change with the seating configuration, this is evidence of price discrimination based on market segmentation.
• D) Charging two different prices is an effective way to avoid an excess demand for play tickets; the higher price lowers quantity demanded to some extent.

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Definitions:

Price Level

Price level indicates the average of current prices across the entire spectrum of goods and services produced in the economy, often compared over time to assess inflation or deflation.

Aggregate Demand Curve

The total demand curve illustrates the overall volume of goods and services the economy requires at various price points.

Investment Demand Curve

A graph showing the relationship between the rate of interest and the total amount of investment demanded by all sectors in the economy.

Market Interest Rate

The prevailing rate at which borrowers can secure loans and lenders receive returns, determined by supply and demand in the money market.