discussionqst3 - Discussion Questions #3 1. The research...

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Discussion Questions #3 1. The research department of a price searcher firm estimated (assume correctly) that the elasticity of demand for its product is -5, and -2 in markets A and B, respectively. Both are estimated at the price-quantity combination in the respective markets. Given that the firm can effectively separate the two markets at zero cost, the firm will have the incentive to take what action with respect to price charged in the two markets? Explain your answer. Assume that the demand functions are linear and that the firm is currently charging a price that maximizes profits when it acts as a nondiscriminating monopolist. 2. Discuss the essential difference between the law proportions and the laws of returns to scale. 3. Explain or denounce the following propositions: a. There is no such thing as a free lunch. b. There cannot be two expensive lunches. (Assume a two good world.) 4. “If forecasts are correct, some speculators will reap a profit. Also, they will have pushed up present prices, which will reduce current consumption and give a larger carryover to next season, so that prices in the future will be lower than they otherwise would be; but current prices are higher than they would have been had foresight been less perfect.” In what sense can it be argued
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discussionqst3 - Discussion Questions #3 1. The research...

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