Quiz_163 - 61 In2009,Netflixwascharging$16..Althoughall , releases(forwhicht

Quiz_163 - 61 In2009,Netflixwascharging$16..Althoughall ,...

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61) In 2009, Netflix was charging $16.99 per month to rent three DVDs at a time. Although allsubscribers 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 latestreleases (for which there is usually a wait list) and will typically receive their DVDs faster. Basedon the information above, what can you conclude about the price elasticity of demand for NetflixDVD rentals?A) Subscribers who rent many DVDs per month are likely view DVDs as complements tomovies at the theatre and therefore making this group wait longer for new releases will havea relatively small impact on demand for Netflix DVDs.B) Subscribers who rent many DVDs per month are likely to have a more elastic demand thansubscribers who rent only a few DVDs per month.C) Subscribers who rent many DVDs per month are likely to have less elastic demand thansubscribers who rent only a few DVDs per month.D) Subscribers who rent many DVDs per month are likely view DVDs as substitutes to moviesat the theatre and therefore making this group wait longer for new releases will have arelatively small impact on demand for Netflix DVDs.Answer: C61)Diff: 2Page Ref: 530-531/530-531Topic: Price DiscriminationLearning Outcome: Micro 14: Discuss production and pricing decisions within monopolies and how publicpolicies affect monopoliesAACSB: Analytic Skills
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  • Spring '11
  • Lee
  • Economics, AACSB, Page Ref, Pentium 4

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