Ricky and Anita are 10 year-olds who have a lemonade stand on a busy beach and would like to practice price discrimination. They know that they are the only sellers of lemonade on the beach and that adults have a less elastic demand for lemonade than kids so they decide to sell their lemonade for $0.25 to kids and $0.50 to adults. Will their price discrimination be successful? Why or why not?
A. Yes, they have all of the necessary criteria to successfully price discriminate.
B. Yes, the only necessary conditions is that they know the relative elasticities of the market segments.
C. No, the kids who buy their lemonade can practice arbitrage.
D. No, Ricky and Anita are price takers.
Answer: C
You might also like to view...
Refer to Figure 9.9. At free trade, domestic producer surplus would be
A) $2,500. B) $50,000. C) $1,250,000. D) $2,500,000. E) $20,000,000.
The FDIC insures deposits in: a. all the commercial banks across the U.S
b. Federal Reserve member banks only. c. any banking institution that sells FDIC insurance. d. any banking institution that purchases FDIC insurance. e. any bank approved by the Fed.
Fixing the insolvency problem caused by the Great Recession meant:
a. Rapidly increasing the U.S. money supply. b. Relieving financial institutions of toxic assets and injecting new equity into them. c.Changing banking rules so there was more financial competition. d. Opening long-term financing sources, which would allow banks, companies, and the government to fund long-term needs, such as new branches, plants, and infrastructure (e.g., bridges and dams) needs.
Refer to Figure 2.2. Which diagram represents the effect of a lower gasoline price on the supply of gasoline?
A. A
B. B
C. C
D. D