The Walt Disney Company is in a position to use a two-part tariff policy in setting prices for admission and rides at Disney World. If this strategy resulted in maximum profit, Disney would convert all consumer surplus into profit.
Which of the following explains why Disney does not maximize its profits from admission and rides?
A) Disney purposely charges less than the profit-maximizing price for admission to Disney World because it does not want to risk alienating its customers.
B) To maximize its profits, Disney would have to know the demand curves of each of its customers. Since this is not possible, Disney is not able to convert all consumer surplus into profit.
C) Disney purposely charges less than the profit-maximizing price for admission to Disney World in order to earn more profit from sales of food, lodging, and other related services.
D) Disney does not charge the profit-maximizing price for admission because it wants to keep admission affordable for children who will be more likely to visit Disney World when they become parents.
Question 2
Which of the following best explains why productivity growth in the United States has been faster than in other leading industrialized nations?
A) There are fewer government regulations in the United States regarding the way firms can hire and fire workers.
B) Job mobility in the United States is more restricted than it is in many foreign countries.
C) European countries have more flexible policies regarding the number of hours employees are permitted to work.
D) The financial systems of foreign countries are generally more efficient than those in the United States.
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