Microeconomics, Student Value Edition (6th Edition)
6th Edition
ISBN: 9780134125756
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 16.1.4PA
Subpart (a):
To determine
Application of arbitrage.
Subpart (b):
To determine
Application of arbitrage.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Price discrimination is the practice of selling the same good at more than one price when the price differences are not justified by cost differences.
Evaluate the following statement: "Price discrimination is not possible when a good is sold in a perfectly competitive market."
False, because perfectly competitive firms do not profit maximize by setting marginal revenue equal to marginal cost
None of these choices
True, because perfectly competitive firms have no market power
False, because perfectly competitive firms have market power
Which of the following kinds of price discrimination occurs when each customer in a single market is charged the maximum price he or she is willing to
pay?
Perfect price discrimination
Third-degree price discrimination
Second-degree price discrimination
○ This is not an example of price discrimination
Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at $2 per trip. The blue line on the following graph shows the weekly demand curve for trips across the city bridge.
On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total weekly revenue when the toll is $2 on the graph. Notice that when you click on the rectangle, the area is displayed.
An advisor has suggested that if you raise the toll to $3, the toll authority would bring in more revenue. To analyze this, use the green rectangle (triangle symbols) to shade the area representing the total weekly revenue when the toll is $3 on the graph.
When the toll is $2, total revenue is _________ thousand per week, but when the toll is $3, total revenue is_________ thousand per week.
Based on your analysis, you can conclude that your advisor is ________ in suggesting that…
Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at
$2 per trip. The blue line on the following graph shows the weekly demand curve for trips across the city bridge.
On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total weekly revenue when the toll is $2 on
the graph. Notice that when you click on the rectangle, the area is displayed.
TOLL (Dollars per vehide)
10
9
8 Demand
3
2
1
0
0
4 8 12 16 20 24 28 32
QUANTITY (Thousands of vehicles per week)
36
When the toll is $2, total revenue is $
40
TR at $2
TR at $3
(?)
An advisor has suggested that if you raise the toll to $3, the toll authority would bring in more revenue. To analyze this, use the green rectangle
(triangle symbols) to shade the area representing the total weekly revenue when the toll is $3 on the graph.
per week, but when the toll is $3, total revenue is $
per week.…
Chapter 16 Solutions
Microeconomics, Student Value Edition (6th Edition)
Ch. 16 - What is the law of one price? What is arbitrage?Ch. 16 - Prob. 16.1.2RQCh. 16 - Prob. 16.1.3PACh. 16 - Prob. 16.1.4PACh. 16 - Prob. 16.1.5PACh. 16 - Prob. 16.1.6PACh. 16 - Prob. 16.2.1RQCh. 16 - Prob. 16.2.2RQCh. 16 - Prob. 16.2.3RQCh. 16 - Prob. 16.2.4RQ
Ch. 16 - Prob. 16.2.5RQCh. 16 - Prob. 16.2.6PACh. 16 - Prob. 16.2.7PACh. 16 - Prob. 16.2.8PACh. 16 - Prob. 16.2.9PACh. 16 - Prob. 16.2.10PACh. 16 - Prob. 16.2.11PACh. 16 - Prob. 16.2.12PACh. 16 - Prob. 16.2.13PACh. 16 - Prob. 16.2.14PACh. 16 - Prob. 16.2.15PACh. 16 - Prob. 16.2.16PACh. 16 - Prob. 16.2.17PACh. 16 - Prob. 16.2.18PACh. 16 - Prob. 16.3.1RQCh. 16 - Prob. 16.3.2RQCh. 16 - Prob. 16.3.3RQCh. 16 - Prob. 16.3.4PACh. 16 - Prob. 16.3.5PACh. 16 - Prob. 16.3.6PACh. 16 - Prob. 16.3.7PACh. 16 - Prob. 16.3.8PACh. 16 - Prob. 16.3.9PACh. 16 - Prob. 16.3.10PACh. 16 - Prob. 16.3.11PACh. 16 - Prob. 16.3.12PA
Knowledge Booster
Similar questions
- Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at $2 per trip. The blue line on the following graph shows the weekly demand curve for trips across the city bridge. On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total weekly revenue when the toll is $2 on the graph. Notice that when you click on the rectangle, the area is displayed. (? 10 TR at $2 8 Demand 7 TR at $3 5 2 1 8 12 16 20 24 28 32 38 40 QUANTITY (Thousands of vehicles per week) An advisor has suggested that you raise the toll to $3, the toll authority would bring in more revenue. To analyze this, use the green rectangle (triangle symbols) to shade the area representing the total weekly revenue when the toll is $3 on the graph. When the toll is $2, total revenue is S per week, but when the toll is $3, total revenue is $ per week. Based on your analysis, you can…arrow_forwardImagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at $7 per trip. The blue line on the following graph shows the daily demand curve for trips across the city bridge. On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total daily revenue when the toll is $7 on the graph. Notice that when you click on the rectangle, the area is displayed. TOLL (Dollars per vehicle) 10 9 8 7 4 2 1 0 0 Demand 10 20 30 40 50 60 70 80 QUANTITY (Thousands of vehicles per day) 90 When the toll is $7, total revenue is $ 100 TR at $7 TR at $8 An advisor has suggested that if you raise the toll to $8, the toll authority would bring in more revenue. To analyze this, use the green rectangle (triangle symbols) to shade the area representing the total daily revenue when the toll is $8 on the graph. thousand per day, but when the toll is $8, total revenue is $ Based…arrow_forwardSpotify, Pandora, and iHeart Radio are some of the more popular music streaming services. These companies offer free access to music. For a small monthly fee, users can purchase premium access and listen to millions of songs on demand and ad-free. But not all artists are fans of free streaming music. Taylor Swift’s move to prevent Spotify from playing her 2016 release, 1989, for free made national headlines. When Spotify refused to restrict access to only paying customers, Swift would not allow the company to play her music for free. She is not alone. Adele, Dr. Dre, Garth Brooks, and Coldplay have all had run-ins with free streaming services. i. If music-lovers obtain music and video content via free music streaming services instead of buying it directly or paying for premium access, what would the record companies’ producer surplus be from music sales? Producer surplus for record companies would... a. be greater than if people had to pay for the music. b. depend on how…arrow_forward
- Suppose in Cape town there is only one producer of Wine knowns as Cape Town Wines. Cape Town Wines is well-trusted by the government since it had been producing wines for centuries that offer indigenous flavour. In 2022, the government decides to allow free international trade so that its citizens can now enjoy more varieties of wine. However, the government is worried about its action on Cape Town Wines. The figure below offers the market structure for wines in Cape Town Price Demand X Pworld MC Quantity Suppose Mary an economist suggests to the Minister of trade to implement a quota that will yield the same import level as provided for by a tariff. Using a diagram analyse the effects of the quota implementation. Clearly indicate the domestic production, imports, price level, consumer surplus, producer surplus and government revenue.arrow_forwardExercise 6.3.Little Kona is a small coffee company considering entering a market dominated by Big Brewer. The benefits of each of them depend on whether or not the first enters and whether the second sets a high or low price: After analazing the graph, answer the following question: Great Brew threatens Little Kona by telling her, "If you go in, we're going to set a low price, so the best thing you can do is not get in." Do you think Little Kona should believe the threat? Why yes or why not?arrow_forwardFor the fill in the blanks the answer choices are: Mo (should or should not), and the (price effect or output effect)arrow_forward
- Suppose an investigation reveals that the prices charged for drinks at a tourist resort are significantly higher than the prices charged for the same drinks at hotels in the nearby village. What might the explanation for this situation be?arrow_forwardthe choices are (janet, darnell) thanlyouuuarrow_forwardPic 1 : You live in a town with 300 adults and 200 children, and you are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customers: Price Adults Children (Dollars) (Tickets) (Tickets) 10 0 0 9 100 0 8 200 0 7 300 0 6 300 0 5 300 100 4 300 200 3 300 200 2 300 200 1 300 200 0 300 200 To maximize profit, you would charge $ ? for an adult's ticket and $ ? for a child's ticket. Total profit in this case would be $ ? The city council passes a law prohibiting you from charging different prices to different customers. Now you set a price of $ ? for all tickets, resulting in $ ? in profit. Pic 2 : Indicate whether each of the following groups of people is better off, worse off, or the same because of the law prohibiting price discrimination.…arrow_forward
- The quantity of a product demanded by consumers is a function of its price. The quantity of one product demanded may also depend on the price of other products. For example, if the only chocolate shop in town (a monopoly) sells milk and dark chocolates, the price it sets for each affects the demand of the other. The quantities demanded, q, and q2, of two products depend on their prices, p, and P2, k as follows: Enter the exact answers. If one manufacturer sells both products, how should the prices be set to generate the maximum possible revenue? What is that maximum possible revenue? P₁ = P2 = H. 9₁ = 9₂ = The maximum revenue is i 280 - 5p₁-3p2 360 - 3p₁ - 5p2.arrow_forwardLaws and rules governing searches and seizures by the police or other government agents stem from the Fourth Amendment to the United States Constitution. During the nineteenth century search warrants became a way to limit police authority. In the 1914 U.S. Supreme Court case Weeks v. United States, the Court determined that “where letters and papers of the accused were taken from . . . premises by an official of the United States . . . without any search warrant,” a violation of constitutional protections had occurred. In 1957, Cleveland police officers forcibly entered the home of Dollree Mapp and conducted a warrantless search for a bombing suspect. Although no suspect was found, officers discovered allegedly obscene materials, the possession of which was prohibited under Ohio state law. Mapp was later convicted of possessing obscene materials. She appealed her conviction on the basis that the officers admitted to using a false warrant and the confiscated materials were protected…arrow_forwardUse the willingness-to-pay information about the buyers (Ariel, Bridget, and Connie) and the willingness-to-accept information about the sellers (Daniel, Etienne, and Franklin) below to construct a "stepped" demand and supply diagram like this one from my notes on Unit #7. (You'll also have one question to answer below.) Willingness-To-Pay information willingness-to-pay for the 1st widget willingness-to-pay for the 2nd widget willingness-to-pay for the 3rd widget willingness-to-pay for the 4th widget willingness-to-pay for the 5th widget Ariel $6 $5 $3 $2 $1 Willingness-To-Accept information Daniel willingness-to-accept for the 1st widget $1 willingness-to-accept for the 2nd widget $2 willingness-to-accept for the 3rd widget $4 willingness-to-accept for the 4th widget $7 willingness-to-accept for the 5th widget $8 Answer: 29 Bridget Connie $10 $8 $8 $7 $6 $6 $4 $4 $2 $3 Etienne Franklin $2 $5 $7 $8 $11 $3 $5 $7 $9 $12 Note that there are multiple versions of these tables, so if you…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning