Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 14, Problem 3MC
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Which of the following is a necessary condition for price discrimination?
Group of answer choices
a. Buyers are aware of prices charged to other buyers.
b. The seller is a perfectly competitive firm.
c. Buyers have identical elasticities of demand.
d. Resale of the product or service is possible.
e. The seller can separate consumers according to their elasticities of demand.
1. A manufacturer estimates that D(p)=3000e0.05p units of a particular good will be
sold at market price of p cedis per unit. Determine the market price that will result in
marginal revenue of zero.
2. A manufacturer estimates that q = 800/30 – p units of a commodity are demanded
when
cedis
per
unit are charged.
a. Express the price elasticity of demand as function of p .
b. Calculate the price elasticity of demand when p=10. Interpret the result.
c. Find the price at which the price elasticity of demand is unit-elastic.
3. An auto maker estimates that when q units of its saloon cars are sold in a day, its
profit in millions of cedis is modelled as
P(q) =100+25In
20
Find the
2
number of cars that should be produced and sold to maximise profit.
a.
b.
If a firm's the price elasticity of demand (Eg) to be-3.5 and marginal cost (MC) is $15.
Using the mark-up rule, what is the optimal price for the firm to charge?
If the price elasticity of demand (En) changes to -3.0, and MC is still $15. Use the
mark-up rule to find the new optimal price for the firm to charge?
What is the defining feature of a Pure Selling Problem and what impact does it have
one the firm's goal to maximize profit?
Chapter 14 Solutions
Managerial Economics: A Problem Solving Approach
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- You and your friend who just graduated visit a local ice cream parlor. By showing your student id you are able to buy an ice cream cone for $1 cheaper than your friend. What type of price discrimination is this an example of? A. First-degree price discrimination B. Second-degree price discrimination C. Third-degree price discrimination D. Fourth-degree price discriminationarrow_forwardWhich of the following is not a requirement for a successful price discrimination strategy? A. A firm must have market power B. The firm must be able to prevent consumers who buy a product at a low price from reselling it to other consumers at a high price. C. Some consumers must have greater willingness to pay for the product than other consumers, and the firm must be able to know what prices consumers are willing to pay D. The good must be a very expensive goodarrow_forwardWhich of the following is not an example of price discrimination? a. Senior citizen discount at the movies b. Grocery coupons c. Shipping a package further costs more d. Charging a higher price for ice-cream during the summer and a lower price in the winterarrow_forward
- If a firm engages in perfect price discrimination, it charges a. different prices to customers based on how many units of output they buy b. each customer the highest price the customer is willing to pay c. different prices to customers based on how old they are d. each customer the average cost of the product e. each customer the lowest price the customer is willing to payarrow_forwardWhat would consumer surplus be?arrow_forwardWhich of the following is NOT an example of price discrimination? a. Christmas sales b. student discounts at the supermarket c. discounted meals for children at Burger King d. airlines charging lower prices to travelers who travel on Sunday nightarrow_forward
- 1. Company A is the only one that can sell a certain number of products in New York City. Firm A faces competition elsewhere in the United States. If Company A is able to price discrimination, a. Will prices in New York City be different from elsewhere? if yes or no, explain your reasons clearly. b. In this case, do you think there will be a high correlation of price movements between New York City and elsewhere? c. What do you think about the existing market structure in New York? please help with your explanation by drawing the required relevance curve.arrow_forwardWhich of the following statements about price discrimination are true? Choose one or more: A. One example of price discrimination is Subway charging more for its footlong subs than for its 6-inch subs. B. One example of price discrimination is a movie theater charging a lower price for a 2:00 PM movie than it charges for the same movie at 8:00 PM. C. One example of price discrimination is a restaurant that provides a "senior discount" to people over age 50. D. Price discrimination usually leads to higher total surplus than single-price monopolies, and it can even maximize total surplus. aarrow_forwardThe following are the necessary conditions which must be fulfilled for the implementation of price discrimination except for ______ a. there should be no arbitrage b. the market must be divided into sub-markets with different elasticities of demand c. the good or service in question should not be resaleable d. the market must be divided into sub-markets with different elasticities of supplyarrow_forward
- Which of the following statements about price discrimination is FALSE? Question 17Answer a. Price discrimination is inconsistent with perfect competition b. 1st degree price discrimination always results in an efficient outcome c. None of the statements are false d. Price discrimination typically improves efficiency e. 3rd degree price discrimination always results in an efficient outcomearrow_forwardWhich of the following is NOT a condition needed for price discrimination? Select one: a. The company has market power in its product market. b. The company can keep customers from reselling the product after they have purchased it. c. The company has a perfectly elastic demand curve. d. The company knows how much different customers are willing to pay for the productarrow_forwardSuppose you own fast food takeaway shops, one in Glebe, with lots of competition, and one in Tibooburra, with little competition. In Glebe, the price elasticity of demand is -2.5, while in Tibooburra, it is -2.0. Assume the marginal cost of providing a combo burger is $10. What are the optimal prices of a combo burger in each location?arrow_forward
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