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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Q) Price Discrimination: (short Answer)
Why do airlines charge different fares for the same flight?
Which of the below is NOT an example of price discrimination?
a.
A store that offers a senior’s discount on Thursdays.
b.
A fast-food restaurant sending coupons to the public.
c.
A grocery store that offers better pricing if the customer buys in bulk.
d.
Competing grocery stores have different prices for milk.
Monopoly and Price Elasticity
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Managerial Economics: A Problem Solving Approach
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Q1. Given cost function f(x) = 1/2(c)(x2), where c>0, and demand curve y(z) = z-a, where a > 1 a). Compute price elasticity of demand. b). Draw a diagram showing marginal cost and marginal revenue c). Find price and output that maximize profits d). Find the markup (price divided by marginal cost). Does it increase or decrease based on elasticity of demand?arrow_forwardJohnny Rockabilly has just finished recording his latest CD. His record company’smarketing department determines that the demand for the CD is as follows:The company can produce the CD with no fixed cost and a variable cost of $5 per CD.a. Find total revenue for quantity equal to 10,000,20,000, and so on. What is themarginal revenue for each 10,000 increase in the quantity sold?b. What quantity of CDs would maximize profit? What would the price be? What wouldthe profit be?c. If you were Johnny's agent, what recording fee would you advise johnny to demandfrom the record company? Why?arrow_forwardPrice Discrimination: You own a set of sports memorabilia that you could sell in Rochester and Minneapolis. You could sell them as a bundle or seperately in Rochester or Minneapolis. You know the WTP of your customers/collectors in both cities (see below for the WTP). You costs are $1000 for the Rochester memorabilia and $3000 for the Vikings memorabilia. A. if arbitrage is NOT possible, what is the profit you sell the movies as a bundle versus as singles in both cities? B. if arbitrage IS possible, what profit would you make if you sell them as a bundle in both cities? WTP for Roch Mem. WTP for vikings mem. rochester 12,000 7000 minneapolis 4000 15,000arrow_forward
- Price Discrimination à what does it mean? Who does this practice? How and why? Give suitable examples in this regardarrow_forwardIs this a form of price discrimination? Why? Include in your analysis differing levels of elasticity, if relevant, and any other feature. Why would an airline use this practice? Provide a dollar and cents example. The airlines caught up with this scheme and ended it. What principal of price discrimination did the students violate so as to end it?arrow_forwardPrice Discrimination: SouthSide Salon is a local bar and nightspot in Mankato. On weekends, it requires a $5 cover charge to defray the costs of the live musical acts. This has worked wonderfully, as it generates capacity crowds and a long line of people waiting to enter. Questions: Explain the economic significance of charging a $5 cover for the live musical acts (what kind of price discrimination is this?). Provide two (2) price discrimination schemes of 2nd and 3rd degrees that the bar could implement to increase profitability. Make sure to explain if identification and arbitrage are necessary conditions and why.arrow_forward
- 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.arrow_forwardA publisher has the following table of demand for the next novel by one of its famous authors: Price Number of novel in demand 100 0 90 1 80 2 70 3 60 4 50 5 40 6 30 7 20 8 10 9 0 10 The author is paid $2 to write the book (Fixed Cost or FC) and the marginal cost (MC) of publishing it is a constant $10 per book. a) Calculate the total revenue, total cost, and corresponding profits for each quantity. What quantity would a profit-maximizing publisher choose? What price would he set? b) Calculate marginal revenue. How does marginal revenue compare to price? Explain. c) Plot the marginal revenue (MR), marginal cost (MC), and demand (D) curves. At what quantity do the marginal revenue and marginal cost curves intersect? What does this mean? d) Obtain the economic profits (EP) of this monopolist and graph.arrow_forwardWhat would happen to the following if there is anincrease in marginal cost? (a) The price that the monopolist can charge. (b) The quantity that the monopolist will produce. (c) The quantity that the perfectly competitive industry will produce. (d) The maximum profit of the perfectly competitive industry. .arrow_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_forwardWhat can you say about the price, with and without price discriminationarrow_forwardFor the following exercise, which has already been published previously, please you only need to answer question d) A publisher has the following table of demand for the next novel by one of its famous authors: Price Number of novel in demand 100 0 90 1 80 2 70 3 60 4 50 5 40 6 30 7 20 8 10 9 0 10 The author is paid $2 to write the book (Fixed Cost or FC) and the marginal cost (MC) of publishing it is a constant $10 per book. a) Calculate the total revenue, total cost, and corresponding profits for each quantity. What quantity would a profit-maximizing publisher choose? What price would he set? b) Calculate marginal revenue. How does marginal revenue compare to price? Explain. c) Plot the marginal revenue (MR), marginal cost (MC), and demand (D) curves. At what quantity do the marginal revenue and marginal cost curves intersect? What does this mean? d) Obtain the economic profits (EP) of this monopolist and graph.arrow_forward
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