Price Discrimination Questions there are five questions, please answer each question as completely as possible answer each question as completely as possib

Price Discrimination Questions there are five questions, please answer each question as completely as possible answer each question as completely as possible, and you cannot use any
references.
1. Consider an MBA program:
a) What is the relationship between the program’s average costs and
the number of students in the program? Graph it out, supposing the
current average cost is $10K per student/year with 30 full-time students.
Do you think average cost will increase or decrease with more enrollment?
Why?
b) Is it potentially efficient to offer different concentrations to MBA
students? Explain.
c) Does the university price-discriminate? How?
2. Draw graphs for both a pure monopolist who sets output where
MR=MC and for a monopolist who is able to perfectly price discriminate.
You may, for the sake of simplicity, assume that MC is constant (flat) in
both cases. Label the deadweight losses (if any) for both graphs, and
answer the following questions:
a) Which is more efficient, in the economic sense?
b) Which is better for consumers?
c) Which results in higher monopoly profits?
d) Normative question – is price discrimination a bad thing?
3. Suppose Fred wants to open a pizza delivery service to compete with
the current monopolist, Domino’s Pizza, in Springfield, Alabama. If
Fred’s costs are higher than Domino’s, is it possible that he can still
profit by setting a price above his marginal cost? How will Domino’s
respond if Fred enters the market? Draw a graph to support your answer.
Suppose Fred gives up and decides he can no longer compete with
Domino’s at the current market price. Does Domino’s revert to
monopoly pricing and output (MR=MC)? Why or why not? Is there any
situation in which pure monopoly pricing could persist? Explain.
4. Consider a home seller and buyer in terms of a game in form. Suppose
the buyer either makes an offer or not, then the seller can respond by
rejecting the offer, accepting it, or asking for a higher price. Draw it out,
and create your own set of payoffs (it can be in dollars). Is there a stable
equilibrium?
5. Which market structure is the most efficient in a static sense? Which is
most efficient in a dynamic sense? Explain your reasoning.

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