Entrance fee is and the per unit price is 12 8

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entrance fee is ______ and the per-unit price is ______. $12; $8 Incorrect $8; $12 Incorrect $16; $8 ( True Answer $8; $16 Incorrect )Correct
63 4 Answer the following questions. a. What are the two basic requirements to practice price discrimination? b. Assuming the two basic requirements to practice price discrimination are m situation in the left column of the following table with the appropriate pric right column. Table 10.10 Situation Pricing Stra The firm's customers do not have different demand curves. Perfect price The firm cannot directly identify customer's demand before they buy the product. Coupons, ver discounts, or The firm's customers have different demand curves, and the firm knows each customer group's demand curve before they buy the product. Segmenting The firm's customers have different demand curves, and the firm knows each customer's demand before they buy the product. Block pricing tariff a. The firm must have market power and must be able to prevent resale of its product. b. Situation Pricing Strategy The firm's customers do not have different demand curves. Block pricing or t tariff The firm cannot directly identify customer's demand before they buy the product. Coupons, version quantity discount
bundling The firm's customers have different demand curves and the firm knows each customer group's demand curve before they buy the product. Segmenting The firm's customers have different demand curves and the firm knows each customer's demand before they buy the product. Perfect price discrimination 63 5 A firm faces the demand curve Q = 20 0.8 P and marginal cost MC = 2.5 Q. a. If the firm cannot price-discriminate, what is the profit-maximizing price b. If the firm can practice perfect price discrimination, how many units will a. Solve for the firm's inverse demand curve: P = 2 1.25 Q . Next, solve for marginal revenue = 25 2.5 Q . Set MR = MC and solve for Q: 25 2.5 Q = 2.5 Q Q = 5 P = 25 1.25(5) = $18.75 b. Set P = MC: 25 1.25 Q = 2.5 Q Q = 6.67 63 6 Figure 10.12 Reference: Ref 10-21 (Figure 10.12) Complete the following table. Single-Price Monopoly Perfect Price Consumer surplus Producer surplus Deadweight loss Single-Price Monopoly Perfec Discrim
Consumer surplus 0.5(10 ? 7)(6 ? 0) = $9 $0 Producer surplus (7 ? 4)(6 ? 0) + 0.5(4 ? 2.50)(6 ? 0) = $22.50 0.5(10 ? 2.50)(10 ? 0) = $37.50 Deadweight loss 0.5(7 ? 4)(10 ? 6) = $6 $0 63 7 Table 10.11 Customer Maximum Willingness to Pay (one-way airfare) Martin $150 Adam $130 Tina $110 Tia $90 Kylee $70 Kyler $30 Reference: Ref 10-22 (Table 10.11) Suppose that the marginal cost of a one-way airfare is $30. a. If the airline practices perfect price discrimination, how many customers w way airfare? How much producer surplus is earned from perfect price discr

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