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 […]
Date: September 9th, 2020
If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel, A) airlines would charge the same price to each type of flyer. B) airlines would still charge business flyers a higher fare since the traveler’s employer pays anyway. C) airlines […]
Date: September 9th, 2020
A weapons producer sells guns to two countries that are at war with each other. The guns can be produced at a constant marginal cost of $10. The demand for guns from the two countries can be represented as: QA = 100 – 2p QB = 80 – 4p Why is the weapons producer able […]
Date: September 9th, 2020
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. […]
Date: September 9th, 2020
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
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
Assume you have four tickets to a U2 concert. You decide to sell each of them separately on an auction site such as eBay. Your auctions represent A) price differentiation. B) perfect price discrimination amongst those who bid for your tickets. C) perfect price discrimination amongst all people who buy tickets for the concert. D) […]
Date: September 9th, 2020
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) […]
Date: September 9th, 2020
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 […]
Date: September 9th, 2020
