Josh operates a funeral service business. He is able to sell coffins to his clients. In this situation: 1. price discrimination is not possible. 2. price discrimination is possible because Josh can discover a client's willingness to pay. 3. price discrimination is possible as Josh could sell the same coffin to different

Josh operates a funeral service business. He is able to sell coffins to his clients. In this situation: 1. price discrimination is not possible. 2. price discrimination is possible because Josh can discover a client's willingness to pay. 3. price discrimination is possible as Josh could sell the same coffin to different

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 3SCQ: Suppose the local electrical utility, a legal monopoly based on economies of scale, was split into...

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Suppose that a small-town theater has six potential customers and is looking to implement price discrimination depending on when customers want to atlend. Suppose the marginal cost of serving an additional customer is $1.50. The data provide information about the Lime of attendance and willingness to pay for a ticket. Maximum willingness Time of Customer to pay attendance Brandon $4 matinee Tyler $35 evening Austin S10 evening Alexis $7 matinee Ashley $12 evening Emily $12 matinee What should the theater charge for evening lickets? 20 Incorrect What should the theater charge for matinee tickets? 24
1.1. Optimal pricing. There two consumers, Alice and Bob, and two kinds of products A and B. Alice and Bob have valuations according to the table AB Alice 34 62 Bob 55 90 You sell the products and it costs you nothing to produce them. You know this table, but when Alice or Bob walk into your store, you cannot tell who they are. That is, if Alice walks in, you do not know if perhaps it is Bob instead who walked in, and vice-versa. What is the optimal pricing plan for the two products?
Larry, Curly, and Moe run the only saloon in town.Larry wants to sell as many drinks as possiblewithout losing money. Curly wants the saloon tobring in as much revenue as possible. Moe wantsto make the largest possible profits. Using a singlediagram of the saloon’s demand curve and its costcurves, show the price and quantity combinationsfavored by each of the three partners. Explain. (Hint:Only one of these partners will want to set marginalrevenue equal to marginal cost.)
. When Chinese automakers began exporting cars, rather thanfocusing on developed nations in the West, they shippedautos to emerging markets in countries such as Algeria, Russia,Chile, and South Africa. In these markets, even used vehiclesfrom multinational manufacturers are relatively scarce—andrelatively expensive. The Chinese automakers, who prioritizelow cost rather than design or even safety, applied a penetration-pricing strategy. A woman in Santiago, Chile, who boughta new Chery S21 explained, “The price factor is fairly decisive.I paid $5,500 new and full. Toyota with similar features costsaround $12,000.” Why do you think Chinese automakerschose that pricing strategy? Do you think it was successful?As Chinese regulators pressure these manufacturers to maketheir cars safer, do you think they will be able to keep theirprices low compared with those of the international automakers? Why or why not?26
2. Suppose a monopoly produces film and cameras. Consumers demand pictures, which require film and one camera. Two different types of consumers have the following demand for film, q, 100-10p and q = 80-10p. The monopoly cannot price discriminate in the market for film or the market for cameras, but it can bundle the products. The monopoly produces film at a constant marginal cost of $1 per roll. What price will the monopoly set for film and for cameras?
Assume that a large supermarket allows its customers to choose whether they will pay a lower price (if they cut and present a coupon) or a higher price (if they do not). Which of the following is true? This price discrimination and customers who cut coupons have the demand that is price elastic. Select one: a. IS; more O b. is not; more is not; less C. d. is not; equally e. is; less
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It is a surprise to many people that a Mercedes Benz, produced in Germany, is more expensivein Germany than the same car sold in the United States. This is true despite the added costsof shipping the car to the United States. Use the principles of price discrimination to explainwhy this would be so. Ignore differences in taxes
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Suppose a perfectly competitive market for hotdog stands in New York City becomes monopolistically competitive when gourmet, discount, andethnic hot-dog retailers show up, making eachcart slightly different. If hot dogs from differentstands are now imperfect substitutes and there arenumerous carts in the city, compare the producerand consumer surplus and total social welfarebefore and after the change
Suppose the local electrical utility, a legal monopoly based on economies of scale, was split into four films of equal size, with the idea that eliminating the monopoly would promote competitive pricing of electricity. What do you anticipate would happen to prices?
itle A reliable 15-year-old babysitter can be a price maker within her own neighborhood. Suppose that th Description A reliable 15-year-old babysitter can be a price maker within her own neighborhood. Suppose that this babysitter wishes to implement a Multipart Pricing Plan. Customers who use her services less than L hours per month will pay a high price of PH dollars per hour. Customers who use her services more than L hours per month will still pay PH dollars for the first L hours, but for any additional hours they can then pay the lower price PL dollars per hour which she will generously set equal to her marginal cost. Assume that market demand is QD = 60 – 10P and her total costs are C = 3Q; so PL = $3 per hour. If she set her high price at $4 per hour, would her customers accept a limit of L = 24 hours per month in order to use the remainder of her services at a price of $3 an hour? Provide a labelled diagram and briefly explain. Suppose that this talented babysitter was…