Suppose there are four buyers all considering purchasing round-trip airfare from Boston to Miami with the following price elasticities of demand for this purchase: Buyer A: 1.5, Buyer B: 0.7, Buyer C: 1.0, Buyer D: 2.3. If the airline knows of these elasticities and practices price discrimination, which buyer will pay the highest price for the airfare?
A. Buyer A
B. Buyer B
C. Buyer C
D. Buyer D
Answer: B
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An increase in government spending may expedite recovery from a recession in the short run, but in the long run this policy may
A) raise interest rates and reduce consumer expenditures on automobiles and new houses. B) make domestic businesses less competitive in international markets as the dollar appreciates in value. C) reduce investment in new capital. D) All of the above are correct.
Explain why the price elasticity of demand changes along a linear demand curve
What will be an ideal response?
To practice third-degree price discrimination, each of these market conditions must be met except which one?
A) The firm must have market power. B) No arbitrage opportunities can exist between customer groups. C) Different groups of customers with equal own price elasticities of demand must exist. D) Different groups of customers with different own price elasticities of demand must exist.
One of the reasons why wages are "sticky downward" is that union workers often operate under a multiyear contract with a company and make wage reductions difficult or impossible during the contract period
a. True b. False Indicate whether the statement is true or false