Economics

Which of the statements about price discrimination is (are) false? Answer It must be possible to segment the market. It must be difficult to transfer the seller’s product from one market segment to another.   There must be differences in the elasticity of demand from one segment to another.

In making promises that are not guaranteed by third parties and in imposing penalties that are not enforced by third parties, all of the following are credibility-enhancing mechanisms except Answer establishing a bond forfeited by violating the commitment investing in a non-redeployable reputational asset tied to the promise or threat   offering a warranty delivering […]

l are equal to the proportion of debt and equity ____. Answer used to finance the project used to finance the projects undertaken last year in the industry average capital structure in the firm’s target capital structure

Third-degree price discrimination exists whenever: Answer the seller knows exactly how much each potential customer is willing to pay and will charge accordingly. different prices are charged by blocks of services. the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups. the seller will bargain with buyers […]

The following are possible examples of price discrimination, EXCEPT: Answer prices in export markets are lower than for identical products in the domestic market. senior citizens pay lower fares on public transportation than younger people at the same time. a product sells at a higher price at location A than at location B, because transportation […]

Even ideal cartels tend to be unstable because Answer firms typically prefer competition to collusion as competition, because it leads to more profits. collusion leads to lowest possible overall profits in the industry. oligopolistic managers are extremely risk loving. firms can benefit by secretly selling more than they promised the other firms

Barometric price leadership exists when Answer one firm in the industry initiates a price change and the others follow it as a signal of changes in cost or demand in the industry.   all firms agree to change prices simultaneously. one company forms a price umbrella for all others. the firms are all colluding.

2. Ajax Cleaning Products is a medium-sized firm operating in an industry dominated by one large firm Tile King. Ajax produces a multi-headed tunnel wall scrubber that is similar to a model produced by Tile King. Ajax decides to charge the same price as Tile King to avoid the possibility of a price war. The […]

2. The Saturn Corporation (once a division of GM) was permanently closed in 2009. What went wrong with Saturn a. Saturn’s cars sold at prices higher than rivals Honda or Toyota, so they could not sell many cars. b. Saturn sold cars below the prices of Honda or Toyota, earning a low 3% rate of […]

3. Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women. The new frequency recommendation was designed to address the family histories of the patients. The optimal frequency should be where the marginal benefit of an additional pap-test a. equals zero. b. is greater than the marginal cost of […]