Just need #17! 12. Using as simple, non-jargon-filled, language as possible: exp
ID: 1126180 • Letter: J
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Just need #17!
12. Using as simple, non-jargon-filled, language as possible: explain the difference between 1 degree, 2ad degree, and 3"d degree price discrimination. Provide an example of each 13. Suppose a monopolist recognizes that students have a different demand schedule for their product than non-students. Specifically, inverse demand by students is given by: P-50-Qs, while inverse demand by the rest of society (G) is given by P40-Qc. The monopolist's costs are given by TC(Q) 5050. If the monopolist were to attempt to 3d degree price discriminate by selling to each group at a different price, what price would it charge students? What price would it charge the general public? Why wouldn't this work? 14. Firm X is a monopolist that faces market demand with elasticity equal to -3, and Firm X's marginal cost of output is $24/unit. Use the mark-up formula to find Firm X's profit maximizing price 15. Firm W is a monopolist that faces market demand with elasticity equal to -2, and Firm W's profit maximizing price is $48unit. Use the mark-up formula to infer Firm W's marginal cost per unit at its current output level. 16. If Firm A operates in a perfectly competitive industry, with market price = $1,200/unit. If Firm A's total cost function is given by TC(q) = 2042 + 104 + 100, find Firm A's profit maximizing level of output.Explanation / Answer
12. Price discrimination refers to the practice of charging a different price for the same good. There are three types of price discriminations, which are:
• First Degree Price Discrimination: In first-degree price discrimination, a firm charges a different price for each unit of the product consumed. This is called perfect price discrimination as the firm charges the maximum price a consumer is willing to pay for each individual unit of a product. First-degree price discrimination has no consumer surplus and it maximizes the profit of the firm.
For example, if a burger seller charges a different price for each consecutive burger consumed by a person depending on the maximum willingness of the person to pay, this will be a first-degree price discrimination.
• Second Degree Price Discrimination: In second -degree price discrimination, a firm charge different price for different quantities of purchase. For example, suppose a vegetable seller sells tomatoes $2/kg when 1 kg is purchased, $1.75/kg when 5 kg are purchased and $1.60/kg when 10 kg are purchased. This is an example of second-degree price discrimination.
• Third Degree Price Discrimination: In third-degree price discrimination, firms charge a different price to different consumers for the same good. For example, a hotel might provide discounts on early booking. This is an example of selling the same good or service (hotel service) at a different price to different consumers (early birds vs. latecomers).
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