Select the correct statements. Note. Multiple correct, multiple selections A. With first-degree price discrimination, the marginal revenue curve is below the demand curve, with the absolute value of the slope equal to twice the slope of demand B. With first-degree price discrimination, the marginal revenue curve is the same as the demand curve. C. With third degree price discrimination, the firm identifies different consumer groups, or segments in a market and then charges a price for each segment by setting the price equal to marginal cost D. With a block tariff (with two blocks), the consumer pays one price for units consumed in the first block of output (up to a given quantity) and a different (usually lower price for any additional units E. Mixed bunding is sometimes the most profitabile strategy for a firm because consumers prefer to spend on binges and make multiple purchases at the same time

Select the correct statements. Note. Multiple correct, multiple selections A. With first-degree price discrimination, the marginal revenue curve is below the demand curve, with the absolute value of the slope equal to twice the slope of demand B. With first-degree price discrimination, the marginal revenue curve is the same as the demand curve. C. With third degree price discrimination, the firm identifies different consumer groups, or segments in a market and then charges a price for each segment by setting the price equal to marginal cost D. With a block tariff (with two blocks), the consumer pays one price for units consumed in the first block of output (up to a given quantity) and a different (usually lower price for any additional units E. Mixed bunding is sometimes the most profitabile strategy for a firm because consumers prefer to spend on binges and make multiple purchases at the same time

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.4P: Suppose the market for Hula Hoops is monopolized by a single firm. a. Draw the initial equilibrium...

See similar textbooks

Similar questions

Logically Explain: (a) Which degree of price discrimination may cause favor for the consumer rather than producer? Explain it with the help of most appropriate example.
Q2. a) define the income elasticity of demand? b) what is the normal and an inferior good? c) define the cross-price elasticity of demand? d) Compare and contrast monopoly and perfect competition market structures in the Long-run.
Bonus: A monopolist sells output at zero cost to two types of consumers, H and L, whoseinverse demand curves are given by Ph=45-5q and pl=30-5q. Derive and discuss the optimalsecond-degree price discriminating equilibrium. And calculate the consumer surplus for high demanded package only! Note that the monopolist cannot identify individual types, but he knows that there are two types exist.
Suppose that individual demand for a product is given byQd = 1000 – 5P. Marginal revenue, MR = 200 – 0.4Q, andmarginal cost is constant at $20. There are no fixed costs.a. The firm is considering a quantity discount. The first 400 unitscan be purchased at a price of $120, and further units can bepurchased at a price of $80. How many units with theconsumer buy in total?b. Show that this second-degree price-discrimination scheme ismore profitable than a single monopoly price.
6. Individual Problems 14-6 At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (i.e., she cannot price-discriminate). Students with Early Classes Students without Early Classes Coffee 70 60 Banana 51 101 The marginal cost of coffee is 10 and the marginal cost of a banana is 40. The café owner is considering three pricing strategies: 1. Mixed bundling: Price bundle of coffee and a banana for 161, or just a coffee for 70. 2. Price separately: Offer coffee at 60, price a banana at 101. 3. Bundle only: Coffee and a banana for 121. Do not offer goods separately. Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item or bundle. For simplicity, assume there is just one student with an early class, and one student without an…
A) Some industries have found that the best way to bring their product to market is via a two sided market, where advertisers form the other side of the market. Why will there still be a deadweight loss in this kind of market, and what ways could the firms in the industry behave to reduce the deadweight loss?B) Show with a diagram why first degree price discrimination eliminates the deadweight loss in general.C) What three conditions have to be satisfied before a company can engage in price discrimination
Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A Group B(sales per week) (sales per week) Volume of sales beforethe 10% discount 1.55 million 1.50 million Volume of sales afterthe 10% discount 1.65 million 1.70 million A. Using the midpoint method, calculate the price elasticities of demand for group A and group B. B. Explain how the discount will affect total revenue from each group.C. Suppose Nile.com knows which group each customer belongs to when he or she logs on and can choose whether or not to offer the 10% discount. If Nile.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every book it sells. Nile.com knows that its customers can be divided into two distinct groups according to their likely responses to the discount. The accompanying table shows how the two groups respond to the discount. Group A Group B(sales per week) (sales per week) Volume of sales beforethe 10% discount 1.55 million 1.50 million Volume of sales afterthe 10% discount 1.65 million 1.70 million A. Using the midpoint method, calculate the price elasticities of demand for group A and group B. B. Explain how the discount will affect total revenue from each group. C. Suppose Nile.com knows which group each customer belongs to when he or she logs on and can choose whether or not to offer the 10% discount. If Nile.com wants to increase its total revenue, should discounts be offered to group A or to group B, to neither group, or to both groups?
10) Many restaurants offer "early-bird specials" to dinner customers. These specials consist of a significant price reduction on selected menu items purchased before some pre-determined time, e.g., 6 p.m. Is such a practice a form of price discrimination? If so, what type?
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
33. Rodrigo gets a $1.00 discount by buying Cheerios on the end of the aisle that have a store coupon. Olivia buys the same sized Cheerios at the regular price in the cereal section. Is this price discrimination? True False
Q. STIHL, Inc., manufactures gasoline-powered chain saws for professional, commercial, farm, and consumer markets. To “better serve” their customers, STIHL offers its chain saws in four different quality lines and associated price ranges: occasional use, midrange, professional, and arborist. Under what circumstances could offering multiple qualities of a product be price discrimination? What form of price discrimination might this represent—first-, second-, or third-degree price discrimination? Explain why this practice could increase profit at STIHL.