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Please answer questions below. The questions are in bold and it's multiple choice. Please provide right answers. Thank you and have a great day! b

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Please answer questions below. The questions are in bold and it's multiple choice. Please provide right answers. Thank you and have a great day!

image text in transcribed
b 1. A firm operates as a monopolist in a small tourist town. It rents apartments, similar in structure, to tourists. In previous years, the company reduced the rental price in order to rent out additional apartments. The reduction in price reduced the firm's profits. In the current year, the company uses perfect price discrimination to charge for each incremental apartment. Which of the following is true due to the firm's price discrimination? A) The consumer surplus increases, and the firm's surplus decreases. B) The average price decreases, which reduces the total revenue from the first units sold. C) The company's total economic profits decrease as the new price charged impacts all units sold. D) Allocation of resources becomes even more inefficient, creating a greater deadweight loss. E) The demand is equal to marginal revenue, which equals marginal cost for the last unit sold. 2. A firm operating in monopolistic competition is maximizing its profit and earning positive economic profits. Which of the following must be true of its production? A) The price is equal to average total cost at the quantity where marginal revenue equals marginal cost. B) The price is equal to average total cost, and marginal revenue is less than marginal cost. C) The price is less than average total cost at the quantity where marginal revenue equals marginal cost. D) The price is greater than average total cost at the quantity where marginal revenue is less than marginal cost. E) The price is greater than average total cost at the quantity where marginal revenue is equal to marginal cost. 3. Megan and Martha own competing hair salons that are in the same neighborhood. They are both considering offering their clients discounts in order to increase business. The payoff matrix shows their yearly incomes in thousands of dollars if they offer and do not offer discounts to their customers. Martha Discount No Discount Megan Discount $50, $75 $75. 560 No Discount $35, 590 $70. $85 If Megan offers a discount, Martha should . If Megan offers no discount. Martha should A) not discount, discount B) not discount, not discount C) discount, not discount D) discount, discount E) indeterminate

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