ECON 201- Ch.13 Section 1 Questions
Figure: Market for Lithotripters Refer to the figure. Suppose that a German manufacturer can sell its kidney lithotripter in two markets: Country X and Country Y. If this firm is interested in maximizing profits, it should set a price of ____ in Country X and ____ in Country Y.
b; z
After a severe hurricane in South Carolina, the price of electric generators quadrupled. People living outside of South Carolina purchased electric generators in their home states and drove them to South Carolina to sell at a much higher price. What is this an example of?
Arbitrage
Arbitrage is ____ in one market and ____ in another market.
Buying low; Selling higher
Which of the following statements is FALSE? I. If the demand curves are different, it is more profitable to set a single price than different prices in markets. II. To maximize profit the firm should set a lower price in markets with more elastic demand. III. The presence of arbitrage makes it easy for a firm to price discriminate.
I and III only
An important lesson of price discrimination is that:
It only increases profits when the demand curves in two different markets are not the same.
The chapter opens with a story about GlaxoSmithKline (GSK) and Combivir, the anti-AIDS drug. What was one of the reasons that GSK was selling Combivir for such low prices in Africa as compared to Europe?
Lower prices were charged for humanitarian reasons.
Pfizer sells Atgam in New Zealand for $14 per pill and in Brazil for $8 per pill. This implies that the demand curve in New Zealand must be ____ than in Brazil.
More Inelastic
A museum in Russia has two entrances: one for locals (written in Russian) and one for tourists (written in English). People who enter through the entrance written in Russian will end up paying 81.93 Rubles ($3.00). English-speaking tourists will use the entrance written in English, but they will end up paying 409.67 Rubles ($15.00). This practice is an example of:
Price Discrimination
Economists call selling the same product at different prices to different customers:
Price Discrimination
Price discrimination can be defined as:
Selling the same product at two different prices in two different markets.
