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.
If a firm offers a senior citizen discount, A) the firm expects the average senior citizen to have a lower price elasticity of demand. B) the firm expects the average senior citizen to have a higher price elasticity of demand. C) senior citizens may be offended. D) it may be prosecuted for discrimination. ANSWER […]
Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA = 10 – QA, and the inverse demand curve for group B is PB = 18 – QB. The monopolist is able to produce the good […]
Which of the following helps a monopoly perfectly price discriminate? A) unit demand by each consumer B) the product is perishable C) the product is personalizable D) All of the above. ANSWER D
If the price of business broadband is greater than that of residential broadband, all else equal, A) business has greater price elasticity than residential. B) residential has greater price elasticity than business. C) both have positive income elasticity. D) generally speaking, broadband is equally priced. ANSWER B
A group price discriminator sells its product in Florida for three times the price it sets in New York. Assuming the firm faces the same constant marginal cost in each market and the price elasticity of demand in New York is -2.0, the demand in Florida A) has an elasticity of -6.0. B) is more […]
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. How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing? A) The deadweight loss […]
Assume a firm organizes all individuals by their willingness to pay (least to most). If the firm starts to perfectly price discriminate, what is likely to happen? A) Consumers start to arbitrage amongst themselves. B) The firm’s profits will be maximized. C) The firm’s costs will be minimized. D) The firm starts to arbitrage with […]
