What is a primary difference between rebates and coupons? A) Coupons allow individuals to sort themselves into the high-elasticity group after the sale. B) Neither coupons nor rebates are redeemed in high numbers. C) Rebates allow individuals to sort themselves into the high-elasticity group after the sale. D) Coupons are legal and rebates are illegal. […]
If the marginal cost of production is $10, the elasticity of demand for group 1 is -1.5, the elasticity of demand for group 2 is -2.5, and the price paid by group 1 is $15, the price for group 2 is A) $8.33. B) $27. C) $15. D) Impossible to tell. ANSWER A
Suppose a profit-maximizing monopoly is able to employ multimarket price discrimination. The marginal cost of providing the good is constant and the same in both markets. The marginal revenue the firm earns on the last unit sold in the market with the lower price will be A) greater than the marginal revenue the firm earns […]
Price discrimination reveals A) the inherent greed of Western culture. B) the inability for regulators to stop unethical practices. C) that individuals have different willingness to pay. D) that individuals have the same willingness to pay. ANSWER C
While price discrimination is possible between two markets, it is not possible in more than two. Indicate whether the statement is true or false ANSWER False. The number of markets does not matter. All that is required is that markets differ in their respective price elasticity of demand.
Suppose group price discrimination is possible; however, a firm sets the same price in each market. As a result, A) price elasticity of demand is the same in each market. B) the price-inelastic market will buy zero units. C) marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market. D) […]
A perfect price discriminator receives a price equal to marginal revenue for each unit. What will be an ideal response? ANSWER True. A perfect price discriminator sets the price of each unit sold equal to the reservation price of the good. The price equals the maximum price a consumer will pay for a given […]
Explain using welfare measures whether consumers prefer a single price monopoly or a perfect-price-discriminating monopoly. What will be an ideal response? ANSWER Consumers prefer a single price monopoly because they gain some consumer surplus. No consumer surplus exists with a perfect-price-discriminating monopoly.
A monopoly will NOT be able to perfectly price discriminate if A) each consumer does not reveal her reservation price. B) demand is very elastic. C) the firm’s marginal cost curve is upward sloping. D) All of the above. ANSWER A
Suppose a monopoly’s inverse demand curve is P = 100 – Q, it produces a product with a constant marginal cost of 20, and it has no fixed costs. Compared to the consumer surplus if the market were perfectly competitive, consumer surplus is how much less when the monopolist practices perfect price discrimination? A) 3200 […]
