Automobile manufacturers commonly sell new car models at the full suggested retail price during the first few years the car is on the market, and they do not offer rebates or discounts
After the initial sales period, the manufacturers typically offer rebates or discounts on these models. The marginal cost of manufacturing the cars is constant across time. Which of the following statements is true? A) The firms practice peak-load pricing by charging a higher price in the initial sales period.
B) Early buyers have higher reservation prices for the new models, and the manufacturers maximize profits by charging these buyers a higher price.
C) The marginal revenue from buyers who purchase these cars after the initial sales period must be lower that the marginal revenue from early buyers.
D) To maximize profits, the firms equate the buyers' reservation prices across time.
B
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If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?
a. It will give the bank new reserves. b. It will write the bank a check. c. It will transfer cash to the bank's vault. d. It will take reserves from another bank.
John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:Hours PerDay CleaningWindowsTotal Numberof WindowsCleaned0017211314416517Should John spend a third hour cleaning windows?
A. Yes, because the additional amount he would earn is $6, which is better than earning nothing. B. No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7. C. Yes, because he would earn $28. D. Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7.
Figure 12.8 depicts an advertising game between two stores. The outcome of the game will be that:
A. both stores choose to advertise. B. both stores choose not to advertise. C. Store A advertises but Store B does not advertise. D. Store B advertises but Store A does not advertise.
John Maynard Keynes believed that wages may be inflexible in the downward direction. Consequently, an economy
A) could get stuck in long-run equilibrium. B) could get stuck in a recessionary gap. C) could get stuck in an inflationary gap. D) would always produce more than Natural Real GDP. E) b and c