Some charge that third-degree price discrimination is unfair or that it reduces social welfare. Why does charging one group a lower price hurt anyone?
What will be an ideal response?
There's an equity issue about charging different prices to different people, but the real social welfare issue is not about charging a lower price to one group; it's about charging a higher price to the other. If the firm charged a single price, it would be somewhere in between the two group prices, in most cases. So some customers who would be able to buy at a lower price in the combined market pay more (or do not buy at all) in the separated market.
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The expectation of future revaluation causes a balance of payments crisis marked by
A) a sharp rise in reserves and a fall in the home interest rate below the world interest rate. B) a sharp fall in reserves and an even bigger fall in the home interest rate below the world interest rate. C) a sharp fall in reserves and a rise in the home interest rate above the world interest rate. D) a sharp rise in reserves and an even greater rise in the home interest rate above the world interest. E) a sharp fall in reserves and an unchanged home interest rate.
A one-year bond has an interest rate of 5% today. Investors expect that in one year, a one year bond will have an interest rate equal to 7%
According to the expectations theory of the term structure of interest rates, in equilibrium, a two-year bond today will have an interest rate equal to A) 3.0%. B) 5.0%. C) 5.5%. D) 6.0%.