Eco Homework

Refer to the figure below. In this case, the firm charges two different prices. This pricing scheme corresponds to:

third-degree price discrimination intertemporal price discrimination

Bundling products makes sense for the seller when: a. consumers have heterogeneous demands b. the products are complementary in nature c. firms cannot price discriminate d. Both a and c

Both a and c

When a monopolist engages in perfect first-degree price discrimination a. the marginal revenue curve becomes horizontal b. the marginal revenue curve lies below the demand curve c. marginal cost becomes zero d. the demand curve and the marginal revenue curve are identical

D. the demand curve and the marginal revenue curve are identical Because the monopolist charges each customer his or her individual reservation price, the price at which he or she sells the last item is the marginal revenue. This is in contrast to selling to all customers at one price. In that case, if you want to sell more, you have to lower the price to everyone and therefore the marginal revenue is less than the price (marginal revenue curve is below demand).

Suppose a manager is interested in implementing third-degree price discrimination. The manager knows that the price elasticity of demand for Group 1 is -2 and the price elasticity of demand for Group 2 is -1.2. Based on this information alone we can conclude that the price charged Group 2 will be: a. Lower than the price charged to Group 1. b. We do not know without more information. c. The same as the price charged to Group 1. d. Higher than the price charged to Group 1.

Higher than the price charged to Group 1.

Suppose that the marginal cost of an additional ton of steel produced by a Chinese firm is the same whether the steel is for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than in China, which of the following will be correct? a. The Chinese firm sell steel at a lower price abroad than it will charge domestic users. b. The Chinese firm will sell more steel in China and it will sell abroad. c. The Chinese firm will sell more steel abroad than it will sell in China. d. The Chinese firm will sell steel at a higher price abroad than it will charge domestic users.

The Chinese firm sell steel at a lower price abroad than it will charge domestic users.

Cinemas sometimes give senior citizens discounts. What is the possible privately motivated purpose for them to do so? a. Purely because entrepreneurs are benevolent b. Senior citizens have a more elastic demand for movies than other citizens c. Senior citizens lack recreational activities d. None of the above statements is correct

b. Senior citizens have a more elastic demand for movies than other citizens

Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products and sells these products to consumers. There are many other firms that extract and sell crude oil so that the market for crude oil is regarded by Acme Oil as perfectly competitive. The internal transfer price that Acme Oil uses when the crude oil that it extracts is "sold" to one of its refineries: a. is greater than the marginal cost of extracting crude oil b. equals the market price for crude oil c. is unrelated to the market price of crude oil d. equals the market price for crude oil less a discount become Acme Oil does not want to profit from itself

b. equals the market price for crude oil

An electric power company uses block pricing for electricity sales. Block pricing is an example of: a. first-degree price discrimination b. second-degree price discrimination c. third-degree price discrimination d. block pricing is not a type of price discrimination

b. second-degree price discrimination

When a company introduces a new audio product, it often initially sets the price high and then lowers the price about a year later. This is an example of: a. intertemporal price discrimination b. peak-load pricing c. two part pricing d. second-degree price discrimination

intertemporal price discrimination

Uber's surge pricing is an example of

peak-load pricing