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4

In second degree price discrimination, monopolist takes away :

A. All of the consumer surplus

B. All of the producer surplus

C. Some part of the consumer surplus

D. None of them

Correct Answer :

C. Some part of the consumer surplus


Second Degree Price Discrimination The second type of price discrimination involves the establishment of a pricing structure for a particular good based on the number of units sold. Quantity discounts are a common example. In this case the seller charges a higher per-unit price for fewer units sold and a lower per-unit price for larger quantities purchased. In this case the seller is attempting to extract some of the consumer's surplus value as profits with residual surplus remaining with the consumer over and above the actual price paid. Like the case of first degree price discrimination, the firm will produce a level of output where the price charged just covers the marginal costs of production. In the diagram below, we find an example of a firm charging three different prices for the same product. The price P0 is charged per unit if the buyer chooses to buy Q0 units of the good. A lower price P1 is charged for a greater quantity Q1 and the price P2 is charged for the quantity Q*2 (the level of output such that P2 = MC -- the marginal costs of production): Figure 3, Second Degree Price Discrimination Common examples of second degree price discrimination include quantity discounts for energy use; the variations in price for different sizes of boxed cereal, packaged paper products; and sodas and French fries at fast food outlets.

Related Questions

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4

The optimal strategy for a player is termed as:

A. Recessive strategy

B. Dormant strategy

C. Dominant strategy

D. Hidden strategy

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4

In short run:

A. Labor is variable

B. Labor is fixed

C. Capital is variable

D. None of the above

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4

Neutral Technological Progress can be defined as:

A. Technological progress that causes to raise the marginal product of capital and labor in the same proportion

B. Technological progress that causes the marginal product of capital to increase relative to the marginal product of labor

C. Technological progress that causes the marginal product of labor to increase relative to the marginal product of capital

D. None of the above

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4

In terms of price, the indirect utility function may be:

A. Concave

B. Quasi-convex

C. Straight line

D. Convex

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4

Demand for a commodity is elastic when it has

A. Only one use

B. Many uses

C. Uses which cannot be postponed

D. Uses very essential for the consumer

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4

The short-run periods in monopolistic competition are:

A. Parallel to each other

B. Dependent upon each other

C. Independent of each other

D. Zero

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4

Cross-elasticity of demand or cross-price elasticity between two substitutes will be:

A. Negative

B. Positive

C. Infinite

D. Zero

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4

The short-run supply curve of the perfectly competitive firm is given by:

A. The rising portion of its MR over and above the break-even (shut-down) point

B. The rising portion of its MC over and above the break-even (shut-down) point

C. The rising portion of its MC over and above the AC curve

D. The rising portion of its MC curve

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4

Discriminating monopoly implies that the monopolist charges different prices for his commodity:

A. From different groups of consumers

B. For different uses

C. At different places

D. Any of the above

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4

Given a U shaped average cost curve, the relationship between average cost and marginal cost is such that marginal cost must always be:

A. Falling when average cost is falling

B. Rising when average cost is falling

C. Falling when average cost is rising

D. Rising when average cost is rising

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4

At final equilibrium in cournot model, each firm sells:

A. 1/2 of the total market demand

B. 1/4 of the total market demand

C. 1/3 of the total market demand

D. None of the above

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4

Who developed the concept of Representative Firm?

A. A.C.Pigou

B. Alfred Marshal

C. J.M.Keynes

D. D.H.Robertson

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4

When total revenue (TR) falls in monopoly then elasticity of demand is:

A. E =1

B. E >1

C. E <1

D. E =0

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4

If a consumer buys a product that costs Rs.3 and provides an additional 18 units of satisfaction, then for this purchase:

A. Total utility will increase by 6 units

B. The marginal utility per rupee is 6

C. The consumer will buy more because marginal utility is positive

D. The consumer obtained an extra54 units

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4

The fixed cost of a firm:

A. Are fixed even in the long period

B. When expressed as an average, show a continuous decline with increase of output

C. Do not reflect diminishing marginal returns

D. None of the above

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4

The name of the system of direct exchange is:

A. Price system

B. Barter system

C. Islamic economic system

D. Socialistic system

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4

The Law of Proportionality is another name of:

A. The law of diminishing marginal utility

B. The law of demand

C. The Law of Diminishing Returns

D. The law of supply

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4

A firm under perfect competition has:

A. An AR curve which is a horizontal straight line

B. An AR curve which slopes downward

C. An AR curve which has a kink

D. An AR curve shape of which cannot be predicted

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4

The Hicksian indirect utility function in the form of equation is:

A. x =f(P)

B. x =a-bp

C.

D.

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4

If the price of product A decreases and in the result the demand for product B increases then we can say that:

A. A and B are substitute goods

B. A and B are complementary goods

C. A is an inferior good

D. B is an inferior good

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4

When marginal costs curve cuts average costs curve, average costs are:

A. Maximum

B. Zero

C. Minimum

D. Equal to one

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4

Identify the economist who first developed the theory of income determination in its modern form:

A. Paul A.Samuelson

B. J.M.Keynes

C. Joan Robinson

D. Dr.mehboob ul Haq

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4

The shape of the TC curve is:

A. U

B. V

C. P

D. S(inverted)

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4

The slope of an iso-quant represents:

A. MRS

B. MRT

C. MRTS

D. MRPS

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4

The costs faced by the firm against variable factors are:

A. Variable costs

B. Fixed costs

C. Average costs

D. Marginal costs

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4

In cournot model firms:

A. Cannot make price adjustments

B. Can make price adjustments

C. Can adjust number of customers

D. None of the above

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4

The main contribution of Alfred Marshal is in the field of:

A. Research in mathematical economics

B. Economics of labor

C. Theory of production

D. Theory of demand

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4

If the price of Pepsi Cola goes down, you would predict:

A. An increase in supply of coca cola

B. A decrease in supply of coca cola

C. An increase in demand for coca cola

D. A decrease in demand for coca cola

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4

When a competitive firm is in equilibrium in the long-run, its output is such that:

A. Costs per unit of output are lowest

B. Total profits are highest

C. Marginal cost is lowest

D. Profit per unit of output is zero

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4

Some economists refer to iso-product curves as:

A. Engels curve

B. Production indifference curve

C. Budget line

D. Ridge line