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 […]
At the current price of a good, Jessica’s consumer surplus equals 12, Lauren’s consumer surplus equals 14, and Isabel’s consumer surplus is 4. By perfect discrimination, a monopolist could increase his profit by A) 4. B) 12. C) 16. D) 30. ANSWER D
What is one reason car dealerships might move away from perfect price discrimination to uniform pricing? A) Perfect price discrimination doesn’t work. B) Transaction costs erode the profit of perfect price discrimination. C) Consumers are ill-informed and tend to complain too much. D) Uniform pricing is always more profitable and more fair as well. […]
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
Firms price discriminate to maximize total revenue. Indicate whether the statement is true or false ANSWER False. Firms price discriminate to increases profit.
A perfect-price-discriminating equilibrium maximizes A) consumer surplus. B) the associated deadweight loss. C) the market inefficiency. D) total welfare. ANSWER D
