Author Question: A local theater charges 5.00 for every matinee (daytime) ticket, but the ticket prices are much ... (Read 237 times)

swpotter12 · **on:** Jul 1, 2018

A local theater charges 5.00 for every matinee (daytime) ticket, but the ticket prices are much higher during the evening. This is an example of

A) peak-load pricing.
B) second-degree price discrimination.
C) a two-part tariff.
D) bundling.
E) none of the above

Question 2

Smith just bought a house for 250,000. Earthquake insurance, which would pay 250,000 in the event of a major earthquake, is available for 25,000.

Smith estimates that the probability of a major earthquake in the coming year is 10 percent, and that in the event of such a quake, the property would be worth nothing. The utility (U) that Smith gets from income (I) is given as follows: U(I) = I0.5. Should Smith buy the insurance? A) Yes.
B) No.
C) Smith is indifferent.
D) We need more information on Smith's attitude toward risk.