Read the article and answer the multiple choice questions. htt s: www.ws'.com articles SB10001424052?0230401940115?T420651135?22954 The article describes two competing claims: 31 city officials claim that salons are arbitrarily charging different prices by gender, and 2} salon owners claiming that servicing different genders entails producing a product with a different cost function. Provide answers to the following questions. 1.Suppose salons are reasonably close to being described as a perfectly competitive market in manicu res [e asy ent ryfexit, relatively homogenous product across rms, firms are price takers, etc}. Eould we observe price differences across genders without cost differences between them? A. No, in a perfectly competitive market firms have no ability to set price above marginal cost. B. Yes, firms would have the ability to raise prices without losing all their consumers, allowing them to set a price above marginal cost. E. Uncertain, it would depend on whether or not marginal revenue equals marginal cost. 2.5uppose salons have monopoly power, and the salon employees are lying about there being different costs between the two genders for manicures. 1] What kind of price discrimination this is? 2] If men are charged higher prices than women for manicures as in the story. which group is the more price elastic group? A. 2nd degree price discrimination 3' women are more price elastic B. 3rd degree price discrimination j men are more price elastic E. 3rd degree price discrimination ,3 women are more price inelastic D. 1st degree price discrimination f men are more price elastic E. 2nd degree price discrimination 3' men are more price elastic F. 1st degree price discrimination ,3 women are more price elastic 3. Like in question 2, suppose salons have monopoly power and the salon employees are lying about there being different costs between the two genders. Suppose the city is successful using nes to eliminate price discrimination by gender, so that now the salons charge the same price to each gender for manicures. Finally, it does appear to be the case that there are thousands of salons in the city [G oogle Maps turns up 13,000+ results Links to an external site}, and their profit margins seem to be low, so as to indicate that they are a very competitive market even if not perfectly competitive. Would men pay more or less for these services than before the city policy? Iul'ii'ould women pay more or less for these services than before the city policy? A.If price discrimination is banned and a single price is charged. men will pay less and women will pay more. B. If price discrimination is banned and a single price is charged, women will pay less and men will pay l'l'lOl'E. 4. If the nail salon market is perfectly competitive, then which of the following explains the higher prices for men? A. The marginal cost of cleaning men's nails is higher than the marginal cost of cleaning women's nails. B. The demand curve for men is lower (i.e. further to the left) than the demand curve for women. C. The demand curve for men is more inelastic than the demand curve from women. There exist both for-profit and non-profit hospitals. Any large metropolitan area is likely to have several hospitals of each type. Both types of hospitals have access to information which allows them to practice imperfect first-degree price discrimination. Non-profit hospitals need to generate enough revenue so that they are not losing money (i.e. their total revenue must equal total cost). Non-profit hospitals are oftentimes interested in serving low income groups by charging lower fees than they would for their higher income patients. 5. How could price discrimination help the nonprofit hospital further its social objectives (as compared to the prospect of having to charge a single price to all consumers)? A. The non-profit must still cover their costs, but price discrimination could let them generate more revenue from higher income/more price elastic groups so that they can extend services to lower income/more price inelastic groups at lower prices. B. The non-profit must still cover their costs, but price discrimination could let them generate more revenue from higher income/more price inelastic groups so that they can extend services to lower income/more price elastic groups at lower prices. 6. Under what conditions would lead to a profit maximizing for-profit hospital to set the same prices as the nonprofit hospitals seeking to further the social objective of serving low income groups? A. 1) Competition that keeps profits close to zero (i.e. revenues equal costs); and 2) they are able to price discriminate according to elasticity; 3) higher income groups are more price inelastic B. 1) Competition that keeps profits close to zero (i.e. revenues equal costs); and 2) they charge everyone the same price; C. 1) Competition that keeps profits close to zero (i.e. revenues equal costs); and 2) they are able to price discriminate according to elasticity; 3) higher income groups are more price elastic 7. Most state governments have special rules to protect incumbent hospitals (both nonprofit and for- profit) from new competition, so that any new hospital (for-profit or not) cannot easily enter a region. Most states also exempt nonprofit hospitals from taxation, but do tax the for-profit hospitals. How does these policies affect the conditions you considered in question 6? A. The policies likely diminish market competition. B. The policies likely encourage the use of single pricing instead of price discrimination. C. The policies likely change the price elasticity of income groups