In 2009,Netflix Was Charging $16

question 85

Multiple Choice

In 2009,Netflix was charging $16.99 per month to rent three DVDs at a time.Although all subscribers under this plan pay the same rate,they do not receive the same quality of service.Subscribers who rent the fewest movies per month have the best chance of receiving the latest releases (for which there is usually a wait list) and will typically receive their DVDs faster.Based on the information above,what can you conclude about the price elasticity of demand for Netflix DVD rentals?

• A) Subscribers who rent many DVDs per month are likely to have a more elastic demand than subscribers who rent only a few DVDs per month.
• B) Subscribers who rent many DVDs per month are likely to have less elastic demand than subscribers who rent only a few DVDs per month.
• C) Subscribers who rent many DVDs per month are likely view DVDs as complements to movies at the theatre and therefore making this group wait longer for new releases will have a relatively small impact on demand for Netflix DVDs.
• D) Subscribers who rent many DVDs per month are likely view DVDs as substitutes to movies at the theatre and therefore making this group wait longer for new releases will have a relatively small impact on demand for Netflix DVDs.

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Definitions:

Allocating Overhead Costs

The process of distributing indirect costs to specific cost objects, such as products or departments, to accurately reflect the costs of production.

Product-level Activity

Activities and costs associated with a specific product rather than the business as a whole.

Machine Setup

Machine setup refers to the process of preparing and adjusting machinery to perform a specific task or operation in manufacturing.

Advertising

A method used by businesses to promote their products or services through various media to attract new customers or retain current ones.