Define price discrimination. What factors must be present in order for a monopolist to price discriminate? Why do firms price discriminate?
What will be an ideal response?
Price discrimination is selling a good or service at a number of different prices. In order to price discriminate, the firm must be able to identify and separate different types of buyers. In particular, the firm must be able to identify which buyers are willing to pay a higher price than other buyers. And the firm must sell a product that cannot be resold. Therefore it must not be possible for a buyer who pays a low price to resell the product to a buyer who is willing to pay a higher price. Firms price discriminate because it increases their profit. By price discriminating the firm can charge a buyer a price that is closer to the maximum price the buyer is willing to pay. By setting the price closer to the maximum a buyer is willing to pay the firm can gain added total revenue and thereby added economic profit.
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M2 is the narrow measure of the money supply
a. True b. False Indicate whether the statement is true or false
If the ice cream industry is monopolistically competitive, then: a. the price of ice cream equals marginal cost in equilibrium
b. the price of ice cream equals average cost in long-run equilibrium. c. the price of ice cream is less than marginal cost in equilibrium. d. there are significant barriers to entering the ice cream business.
Discretionary policy calls for continual adjustments to the money supply and is associated with the monetarist perspective.
a. true b. false
Which of the following is NOT included in M1 or M2?
A. checking account balances B. currency in circulation outside of commercial banks C. traveler's checks D. credit card balances