The Walt Disney Company Is in a Position to Use

question 22

Multiple Choice

The Walt Disney Company is in a position to use a two-part tariff by charging for admission and also charging for rides inside its two theme parks, Disneyland and Disney World.Which of the following statements regarding Disney's pricing strategy is true?

• A)At one time, admission fees were charged at both parks but all rides were free. Disney has since changed its pricing policy; it earns higher profits by charging for both admission and rides.
• B)At one time, customers had to pay for admission and rides at Disneyland and Disney World. Disney has since changed its pricing policy; it earns higher profits by charging for admission but not for rides.
• C)At one time, customers had to pay for admission and rides at Disneyland and Disney World. Disney has since changed its pricing policy; it earns higher profits by charging for rides but not for admission.
• D)At one time, fees for admission and rides at both parks were set at their profit-maximizing levels. Disney has since changed its pricing policy; it uses a cost-plus pricing strategy for admission and does not charge for rides.

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Definitions:

Variable Costs

Costs that change in proportion to the level of production or sales volume.

Fixed Costs

Costs that do not vary with the level of output or activity, remaining constant over a period.

Break-Even Point

The sales volume at which net income is zero; the intersection of the total cost and total revenue lines on a break-even chart.

Break-Even Point

The point at which costs or expenses and revenue are equal, resulting in no net loss or gain from a business or investment.