Question

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56

​ A recent medical study reports new benefits of cycling. Simultaneously, the price of the parts needed to make bikes falls.  The demand curve would _________ and the supply curve would__________

	a.	​Shift to the right, shift to the left
	b.	​shift to the right, shift to the right
	c.	​shift to the left, shift to the left
	d.	​shift to the left, shift to the right

Question 65

For direct price discrimination to work

	a.	​The firm need not be able to identify the members of the low-value group
	b.	​The firm be able to charge the low-value customers a lower price than the higher-value customers
	c.	​The firm need not worry about any arbitrage since all its customers are charged the same price
	d.	​It needs to be too complicated for the customers to understand

Question 68

A business incurs the following costs per unit: Labor  $125/unit; Materials $45/unit and rent  $250,000/month. If the firm produces 1,000,000 units a month, the total variable costs equal

	a.	​$45Million
	b.	​$1Million
	c.	​$170Million
	d.	​$125Million

Answer 1

The answer is: D). Shift to the left, shift to the right

The shift of the demand curve to the right indicates an increase in demand at whatever price because a factor, such as a consumer trend or taste, has risen for it. Conversely, a shift to the left displays a decrease in demand at whatever price because another factor, such as the number of buyers, has slumped.

The answer is: B). The firm be able to charge the low-value customers a lower price than the higher-value customers.

Direct price discrimination occurs when a firm split up consumers into identifiable groups. For example, rail discounts for OAPs. Indirect price discrimination occurs when a firm offers a menu of different choices and allows the consumer what to buy.

The answer is; C). $170Million

Vc = Labour cost + Raw material cost

Vc = $125 + $45

Vc = $170 per units