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 […]
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
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.
Date: September 9th, 2020
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
Date: September 9th, 2020
Price discrimination is welfare reducing. A) False, price discrimination can increase the coverage of a market thereby increasing welfare. B) False, price discrimination limits the coverage of a market thereby increasing welfare. C) True, price discrimination limits the coverage of a market thereby increasing welfare. D) True, price discrimination can increase the coverage of a […]
Date: September 9th, 2020
If a firm faces a flat demand curve, A) it cannot engage in price discrimination. B) it can only engage in two-part tariffs. C) it can only engage in perfect price discrimination. D) None of the above. ANSWER A
Date: September 9th, 2020
