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M4 Problem Set

M4 Problem Set

Q Question 1 1 / 1 pts Third-degree price discrimination is the practice of charging Question 2 1 / 1 pts A firm produces a good with constant marginal cost. The firm charges $10 per unit for the first 100 units, and $5 per unit for any additional units purchased by a consumer. This is known as Question 3 1 / 1 pts A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing Question 4 1 / 1 pts When a monopolist engages in perfect price discrimination:

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1.different groups of customers different prices for the same products. This is the correct answer. Third-degree price discrimination (aka “market segmentation”) is the practice of charging different groups of customers different prices for the same products. 2.second-degree price discrimination. This is the correct answer. Indeed, quantity discounts are an example of second-degree price discrimination. 3.third-degree price discrimination. This is the correct answer. Charging different prices to members of different groups with different demand curves (aka “market segmentation”) is third-degree price discrimination. 4.the demand curve and the marginal revenue curve are identical. This is the correct answer. In fact, with perfect price discrimination the firm charges a price for each unit equal to consumer’s maximum willingness to pay for that unit, and that consumers’ willingness to pay is represented by the (inverse) demand curve. This implies that P = MR and that the marginal revenue curve coincides with the demand curve.