Some charge that third-degree price discrimination is unfair or that it reduces social welfare. Why does charging one group a lower price hurt anyone?
What will be an ideal response?
There's an equity issue about charging different prices to different people, but the real social welfare issue is not about charging a lower price to one group; it's about charging a higher price to the other. If the firm charged a single price, it would be somewhere in between the two group prices, in most cases. So some customers who would be able to buy at a lower price in the combined market pay more (or do not buy at all) in the separated market.
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Refer to Figure 9-5. If the tariff was replaced by a quota which limited coffee imports to 20 million pounds, the amount of revenue received by coffee importers would equal
A) $5 million. B) $15 million. C) $50 million. D) $78 million.
When the prices of final goods and services increase more quickly than the prices of inputs, we say that:
A. the prices of some inputs are sticky. B. the prices of some final goods are sticky. C. the economy must be in the long run. D. the economy is inefficient.
The figure below shows the market for computers in a small importing country. Dd and Sd are the domestic demand and supply curves of computers, respectively.
The imposition of a tariff on computers caused economic well-being in the country to ________ by
A. fall; $6 million. B. rise; $34 million. C. fall; $34 million. D. fall; $4 million.
A country which does not revalue when financial markets expect it to will probably suffer
A) a real depreciation of its currency. B) lower interest rates. C) a default on its national debt. D) all of the above E) none of the above