Why is it that people who have to fly at a moment's notice often pay some of the highest air fares whereas people who wait until the last minute to buy a ticket to a live performance of play may be able to get a better price than someone who bought
their ticket months in advance.
In both cases the firm is able to figure out the customer's ability and willingness to pay. A plane ticket that is purchased at a moment's notice is clearly sending a signal to the airline that this trip is essential – either an emergency or business related. Airline tickets purchased in advance involve planning and demonstrate that the customer is willing to be flexible about departure days and times. Someone who shows up for a live performance of a play at a moment's notice must not have had a very strong willingness to pay and will be put off by having to pay full price. The person who bought his theater ticket in advance probably didn't want to miss that particular show and didn't want to take his chances at buying it at the last minute only to discover that it is sold out.
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In the figure above, if the exchange rate is equal to 2 Canadian dollars per U.S. dollar, there is a ________ of ________currency and the exchange rate will________
A) surplus; domestic; fall B) surplus; foreign; fall C) surplus; domestic; rise D) shortage; domestic; fall
The weighted average of a firm's expected return on its stock and the interest rate that it pays for debt is known as the:
A) internal rate of return. B) opportunity cost of capital. C) risk-free rate of return. D) company cost of capital.