Suppose California has many apple trees, and the price of apples is low. Nevada

Question

Suppose California has many apple trees, and the price of apples is low. Nevada has few apple trees, and pike of apples is high. Abner buss low-priced California apples and ships them to Nevada, where he resets them at a high price. Is Abner exploiting customers by doing this? No Customers in Nevada voluntarily buy- apples from Abner. Yes Abner's actions increase apple prices in Nevada. Yes, Abner's actions increase apple prices in Califronia. No, Abner is nor earning economic profits Yes Abner is practicing price discrimination. Is he likely to cam economic profits m the long run? Briefly explain. Abner will earn economic profits in the long run if he is the first to resel California apples in Nevada Abner will earn economic profits in die long im if other firms can engage in arbitrage in this apple marker Abner will not earn economic profits in the long run if other firms cannot practice yield management Abner will not earn economic profits in the long run if others firms can engage in arbitrage in this apple market. Abner will earn economic profits in the long run if the law of one price holds.

Explanation / Answer

1.) Abner is not exploiting customers.Customers voluntarily buy apples.Selling of apples by abner infact increases supply of apples and hence lower price for customers.So correct option is A.

2.)Abner will not earn economic profits in long run beacause other firms will also engage in arbritarge ,that is they will also sell apples in Nevada.So competition reduces profits.So correct option is D.

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