The Athenian Theatre Sells Tickets for the Same Play at Different

question 151

Multiple Choice

The Athenian Theatre sells 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:

Contribution Margin

The amount left from sales revenue after variable costs are subtracted, contributing to covering fixed costs and generating profit.

Merchandising Company

Businesses that buy finished goods and sell them at a profit without modifying the product, focusing on distribution rather than production.

Sales Revenue

The income generated from the sale of goods or services before any costs or expenses are deducted.

Relevant Range

The scope of operations within which the assumptions regarding the behavior of variable and fixed costs hold true.