62) In 2011, Netflix was charging $23.98 per month to rent three DVDs at a time as well as receiveunlimited streaming. Although all subscribers under this plan pay the same rate, they do notreceive the same quality of service. Subscribers who rent the fewest movies per month have thebest chance of receiving the latest releases (for which there is usually a wait list) and will typicallyreceive their DVDs faster. Is Netflix engaging in price discrimination, and if so, why?
A) Yes it is; Netflix is charging the same price for two different levels of service. It does this toincrease its profit.B) Yes it is; Netflix wants to discourage those who rent many DVDs per month because theylower the firmʹs profits.C) No, it is not; it is merely differentiating its product by offering different levels of service.D) No, it is not; as long as there is a wait list, Netflix must devise a rationing mechanism. Itsdecision to give priority to those who rent only a few DVDs is a business strategyindependent of pricing.Answer: A62)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 Skills18