What three conditions must hold for a firm to successfully price discriminate?
What will be an ideal response?
Successful price discrimination has three requirements:
1. A firm must possess market power.
2. Some consumers must have a greater willingness to pay for the product than others; the firm must know the prices consumers are willing to pay.
3. The firm must be able to segment the market so consumers who buy at a low price cannot resell at a higher price.
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If the Federal Reserve is currently paying 1% interest on bank reserves, but then reduces that interest rate to 0.5%, banks may decide to hold ________ reserves, and the money supply may ________.
A. fewer; decrease B. fewer; increase C. more; decrease D. more; increase
If an increase in marginal tax rates leads to an increase in tax revenues, then
a. the Laffer curve model of tax revenue is refuted. b. supply-side economics is refuted. c. the economy could be below the tax revenue maximizing tax rate. d. we could be on the upward sloping portion of the Laffer curve.
Refer to Figure 14.2. The substitution effect of the wage decrease on the amount of hours of leisure is:
A) L1 to L0. B) L0 to L1. C) L1 to L2. D) L2 to L0. E) none of the above
If there were no real wealth or interest rate effect, the aggregate demand curve would still be downward sloping
a. True b. False Indicate whether the statement is true or false