Define price discrimination.

Define price discrimination. Explain the difference between first-degree and third-degree price discrimination with two examples of each. Your answer will not be complete without two examples of each.

2.            Assume the following inverted demand function of a firm in the short run: P = 100 – 5Q which yields the MR function as 100 – 10 Q. Now assume the total cost function of this firm  is : TC = 100 + 160Q – 20Q2

The above cost function yields the MC function as  160 – 40Q

Is this firm earning a profit or incurring a loss? What is the amount of short-run profit or loss? Explain fully.

3. Assume the price of a dress shirt was put on sale “buy one get one free”. The original price was $100.00 per shirt. The sale resulted in an increase of quantity sold in the same store for the same period of time from 200 shirts to 800 shirts.

(a) Calculate the price elasticity of demand and interpret your results.

(b). If the price of the shirt is further reduced by 10%, what will happen?

4.            Assume the following demand and supply equations:

Qd: 11.5- 12.5p

Qs: 5.5 + 7.5p

(a). If a seller charges a price of .5 per unit, what will happen?

(b). At what price, there will be no shortage and no surplus? Prove your answer.

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