If a firm sells to two distinct identifiable markets and resale is impossible, why is price discrimination more profitable than setting a single price?
What will be an ideal response?
If the firm charges a single price on the two different markets, marginal revenue in one market will exceed marginal revenue in the other. Without changing output level the firm could raise its profit as follows. The firm could sell one less unit in the low MR market and sell that unit in the higher MR market. As long as MRs differ, the firm can increase profit by changing sales in this direction. As this happens price is increasing in the market where sales are falling and price is falling in the market where sales are increasing.
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The above table shows production combinations on a country's production possibilities frontier. Which of the following points signifies efficient production?
A) 0 units of good X and 40 units of good Y B) 3 units of good X and 25 units of good Y C) 10 units of good X and 16 units of good Y D) 12 units of good X and 1 unit of good Y
Refer to Figure 21-5. "Crowding out" of firm investment as a result of a budget deficit is illustrated by the movement from ________ in the graph above
A) A to B B) C to A C) B to A D) B to C