Ch14 - Ch14 Student: _ A firm faces the demand for its...

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Ch14 Student: ___________________________________________________________________________ A firm faces the demand for its product, , as shown in the figure below. It produces under conditions of constant costs in the long run, and LMC = LAC = $12 per unit. Answer the next 5 questions using this information. 1. A firm faces the demand and cost conditions for its product given in the figure. If the firm must set a uniform price for the good, what price will it set to maximize its profit in the long run? A. $12 B. $24 C. $25 D. $30 E. none of the above 2. At the profit-maximizing uniform price, the firm earns economic profit of __________ when it engages in uniform pricing. A. $3,872 B. $4,728 C. $4,874 D. $5,428 E. none of the above 3. Under uniform pricing, consumers enjoy $______ of consumer surplus. A. $1,872 B. $1,936 C. $2,474 D. $2,500 4. Under uniform pricing, the firm loses sales on _______ units that could be profitably sold if buyers paid their demand prices instead of facing the uniform price. A. 44 B. 50 C. 88 D. 176
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5. If the firm can practice first-degree price discrimination, it will be able to collect $________ in total revenue under perfect price discrimination. A. $1,872 B. $1,936 C. $7,744 D. $9,856 E. none of the above 6. If the firm can practice first-degree price discrimination, it can make a maximum profit of A. $1,872. B. $1,936. C. $7,744. D. $9,856. In the next 9 questions, a firm sells its product to two groups of buyers: daytime buyers and nighttime buyers. There are 50 daytime buyers, all of whom have identical demands given by D D in the figure below. There are 50 nighttime buyers, all of whom have identical demands given by D N in the figure below. The firm's variable costs are constant ( SMC = AVC = $12) and its total fixed cost is $250,000. The marketing director must devise a two-part pricing plan that will maximize the firm's profit. 7. Suppose the marketing director ignores the nighttime market and wishes to extract all consumer surplus from the daytime buyers. The optimal access charge is $_________ and the optimal usage fee is $______ per unit. A. A* = $1,000 and f * = $12 B. A* = $2,400 and f * = $12 C. A* = $7,744 and f * = $12 D. A* = $9,856 and f * = $12 8. Suppose the marketing director ignores the nighttime market and wishes to extract all consumer surplus from the daytime buyers. By setting the optimal access charge and user fee, the firm will earn $_________ of profit on each one of the 50 daytime buyers. A. $1,872. B. $1,936. C. $7,744. D. $9,856.
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9. Now suppose the marketing director wishes to serve both daytime and nighttime buyers, what is the MR f function? A. MR f = 5,000 - 200 f B. MR f = 7,500 - 250 f C. MR f = 8,000 - 250 f D. MR f = 7,500 - 200 f 10. Assuming the firm will serve both daytime and nighttime buyers, what is the MC f function? A.
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This note was uploaded on 01/08/2011 for the course MBA ECON taught by Professor Hamza during the Spring '10 term at Prince Sultan University.

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Ch14 - Ch14 Student: _ A firm faces the demand for its...

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