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exam study guide - Practice questions for Exam IV 1 Define...

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Practice questions for Exam IV 1. Define price discrimination. The business practices of selling the same good for different prices to different customers 2. What conditions must there be for a firm to price discriminate? 1) Discrimination among units of output: both buyers and sellers must be able to track purchase 2) Discrimination among buyers: Buyers with low prices must not be able to re-sell to the high-price buyer (no arbitrage) 3. Why is it possible for an oligopolist to price discriminate while it is impossible for a firm in a monopolistically competitive industry? An onligopolist can price discriminate because they don’t have as much competition and are price makers and can set the prices they want, where in a monopolistically competitive market they have to adhere to what the market price is in order to be able to sell their goods and make a profit. They can’t set the price below the market price because the market price and the revenue is equal to the cost that takes to make that good, so they would be losing money/ 4. Compare efficiency for a single-price monopolist to efficiency with a price discriminating monopolist. Because monopolies are the only kind of market that can efficiently price discriminate, they have an advantage. In a singe price monopoly they only charge one price for their good meaning they only sell to the people that are willing to spend that much money on their good. Where as with a price discriminating monopolist they can charge each individual the maximum amount that they
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This note was uploaded on 04/07/2008 for the course ECON 2020 taught by Professor Kaplan,jul during the Spring '08 term at Colorado.

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exam study guide - Practice questions for Exam IV 1 Define...

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