question
Price discrimination is the practice of:
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charging different prices for the same good and the price differences are not attributable to differences in production or provision costs
question
Arbitrage in markets is the practice of:
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a buyer purchasing a good at one price and reselling it at a different price
question
The costs that are incurred when a good is purchased in one market and resold in a different market are known as:
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transactions costs
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If a firm practices perfect (or first-degree) price discrimination, then its marginal revenue curve is:
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iii. the same as its demand curve
iv. below its average revenue curve
iv. below its average revenue curve
question
If a firm practices perfect (or first-degree) price discrimination, then:
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i. the firm must have some market power (i.e., the market can not be perfectly competitive)
ii. the firm must be able to segment the market by consumer maximum willingness to pay (versus by age, gender, etc.)
iii. the good that the firm produces and sells can not be resold in a secondary market
ii. the firm must be able to segment the market by consumer maximum willingness to pay (versus by age, gender, etc.)
iii. the good that the firm produces and sells can not be resold in a secondary market
question
The ability of a firm to increase profits through discriminatory pricing can be undermined by:
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i. arbitrage
ii. the market in which it operates being perfectly competitive
ii. the market in which it operates being perfectly competitive
question
If a firm practices perfect (or first degree) price discrimination then there will be:
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i. no deadweight loss
ii. no consumer surplus
ii. no consumer surplus
question
Movie theaters commonly charge different prices to different groups of customers for movie tickets but not for items sold at the concession stand. The most reasonable economic explanation for this pricing arrangement is that:
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it is easier to discourage (or prevent) the resale of movie tickets than the resale of concession items
question
Although a market may be comprised of multiple, unique consumer groups with different demands, it is often not possible for a firm to distinguish one group from another, undermining its ability to charge different prices to different consumers. In such a setting, a firm may be able to increase its profits over those that can be attained from uniform pricing by practicing:
answer
second degree price discrimination (or block pricing)
question
Suppose a monopolist is able to segment its market into 2 consumer groups based upon known differences in willingness to pay. Group A's demand function is given by P = 90 - 2Q and group B's demand function is given by P = 70 - 0.5Q. In addition, the marginal cost of producing and selling a unit to group A is the same as the marginal cost of producing and selling a unit to group B. Specifically, MC = 10. If the firm practices second degree (or multi-market) price discrimination, then total profit will be maximized by:
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i. selling Q = 20 units at a price of P = $50 to members of group A
iii. selling Q = 60 units at a price of P = $40 to members of group B
iii. selling Q = 60 units at a price of P = $40 to members of group B
question
If a monopolist engages in perfect (or first-degree) price discrimination, then compared to uniform pricing:
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output and total profit will both increase
question
Consider a monopolist whose total cost function is TC = 40 + 4Q + Q2 and whose marginal cost function is MC = 4 + 2Q. The demand function for the firm's good is P = 160 - 0.5Q. The firm optimizes by producing the level of output that maximizes profit or minimizes loss. If the firm is able to practice perfect (or first degree) price discrimination then the firm will:
answer
produce 62.4 units of output and rounded to the nearest dollar it will earn a profit of $4827
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