econ exam questions
which condition is not necessary for price discrimination
the firm must set different prices to reflect marginal cost
which condition is not necessary for price discrimination to exist
the firm must set different prices to reflect marginal cost
what product is least likely to be produced in a perfectly competitive market
airline jet fuel
If a firm is producing where price exceeds AVC, the firm should continue production even though it may incur a loss since
average revenue is equal to or greater than the average variable costs
first degree price discrimination
charging each individual customer a different price based on their willingness to pay
A competitive firm facing a price of $15 decides to produce 100 units. If the marginal cost of producing the last unit is $20, the profit-maximizing firm should
decrease production
If demand is inelastic, a reduction in price
decreases total revenue
the demand curve for an individual perfectly competitive firm is
downward sloping
normal profit is equal to
economic profit is equal to 0
the more responsive buyers are to change in price
elastic
The price of gold increases by 200%. If the price elasticity of demand for gold is 0.4, what will happen in the market?
gold sales will decrease by 80%
if demand is inelastic a(n) _____ in the price leads to ____in total revenue
increase, decrease
If the managers of the Miami Transit Authority (MTA) raise the fare from $2.00 to $2.25 per ride and, as a result, total revenue increases, then we know that the demand for rides is
is price inelastic
which type of discrimination is as efficient as a competitive market firm
perfect price discrimination/ first degree
the demand curve for an individual perfectly competitive market is
perfectly elastic
second degree price discrimination
practice of charging different prices per unit for different quantities of the same good or service
third degree price discrimination
practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group
other things held constant, when demand is price inelastic, an increase in
price leads to an increase in total revenue
if a company uses 3rd degree price discrimination which example is NOT this
Reservation pricing for each consumer.
consider perfect competition (graph) if price equals .70 cents the firm should
stay open because its making a normal profit
a firm will engage in price discrimination when it believes that doing so will increase
profits
assume that P1>P2>AVC. if market price decreases from P1 to P2 then the perfectly competitive firm that maximizes profits should
reduce production
if the price of a product with elastic demand increases
total revenue will fall
