Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA = 10 - QA, and the inverse demand curve for group B is PB = 18 - QB. The monopolist is able to produce the good for either type of customer at a constant marginal cost of 2, and the monopolist has no fixed costs. If the monopolist is
able to practice group price discrimination, the values of the elasticities of the two groups at the profit-maximizing prices are
A) ?A = -1.25, and ?B = -1.5.
B) ?A = -1.5, and ?B = -1.25.
C) ?A = -0.67, and ?B = -0.8.
D) ?A = -0.8, and ?B = -0.67.
B
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a. consumer preferences b. prices of substitutes c. prices of complements d. the price of the good itself e. income
An American farmer sells produce to an individual living in Bermuda. To Americans, the produce is a(n)
A) import. B) export. C) quota. D) tariff.
The proponents of rational expectations and monetarism think that the Federal Reserve should adopt
A) a constant monetary growth rule. B) an interest rate target. C) a monetary aggregate target. D) an inflation target.