Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 25, Problem 7E
To determine
To explain:
The conditions for the given two-tier pricing scheme to be profitable.
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Students have asked these similar questions
a) Why does TRUVADA cost $1,780 in the United States whereas it's just $8 in Australia?b) Can you provide other examples of price discrimination?
What is the Difference between predatory pricing, tie-in sales, and bundling?
At what Price should All Firms Produce at?
What should a Firm do for Pricing if it faces Elastic or Inelastic Demand?
There are two movie theaters in the town of Harkinsville: Modern Multiplex (Firm 1) and Galaxy (Firm 2). The demands for each firm are: Q1 = 125 – 3.5P1 + 2P2 and Q2 = 125 – 3.5P2 + 2P1, where quantities are measured in hundreds of moviegoers. Costs per customer are: $4 for Firm 1 and $3 for Firm 2.
Instructions: Use no decimals. Use the average cost to calculate monopoly profits. Do not round if values are used to complete other calculations. Use commas (30,000 instead of 30000)
Complete the following table.
P1
P2
Q1
Q2
Profits F1
Profits F2
Firm 1 colludes, Firm 2 cheats w/ QDC
2,824
Firm 1 colludes, Firm 2 cheats w/ QBRF
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Similar questions
- In which cases would an organization benefit from using direct and indirect price discrimination? Does market structure influence the capacity of the firm to use price discrimination?arrow_forwardThere are two movie theaters in the town of Harkinsville: Modern Multiplex (Firm 1) and Galaxy (Firm 2). The demands for each firm are: Q1 = 125 – 3.5P1 + 2P2 and Q2 = 125 – 3.5P2 + 2P1, where quantities are measured in hundreds of moviegoers. Costs per customer are: $4 for Firm 1 and $3 for Firm 2. Instructions: Use no decimals. Use the average cost to calculate monopoly profits. Do not round if values are used to complete other calculations. Use commas (30,000 instead of 30000) Complete the following table. P1 P2 Q1 Q2 Profits F1 Profits F2 Duopoly competition 2,059 Collusion 2,360arrow_forwardA firm practices third-degree price discrimination. With the aid of a graphical illustration, explain the firm’s pricing strategy to maximise profits.arrow_forward
- why price discrimination is profitable in the perfume market or industry ?arrow_forwardDifferentiate geographical pricing from psychological pricing.arrow_forwardindirect price discrimination. Discuss the grocery store coupon market and explain why the grocery stores can use price discrimination in this situation.arrow_forward
- U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. Explain why these companies, for profit reasons, oppose laws allowing reimportation of their drugs back into the United States.arrow_forwardList two things that first-order price discrimination and two-part tariff have in common.arrow_forwardIdentify nine common pricing methods.arrow_forward
- In reference to the chart, calculate and explain in detail what the maximum revenue is for an individual pricing policy, and what the maximum total revenue would be if pure bundling was employed.arrow_forwardAirlines primarily use ___ price discrimination.arrow_forwardThe marginal cost pricing model calculates a markup over marginal costs using estimates of the price elasticity of demand. Will any other pricing strategy result in higher profits?arrow_forward
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