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A firm can charge different prices for its product through price discrimination, which occurs under specific conditions: when the firm has market power, when it can segment the market based on consumers' willingness to pay, and when it can prevent resale between different customer groups. Examples include charging different prices based on age, location, or purchase volume. This strategy helps the firm maximize revenue by capturing consumer surplus from various segments.
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What happens to a monopolistically competitive firm that begins to charge an excessive price for its product?
Consumers will substitute with a rival's product.
What happens to monopolistic competitive firm that begins to charge an excessive price for its product?
Consumers will substitute with a rival's product.
What happens to a monopolistically competitive firm that begins to charge an excessive price for it's product?
Consumers will substitute a rival's product.
What best protect firm form being forced to sell its product unfairly low prices?
A strong government BEST protects a firm from being forced to sell its product at an unfairly low price.
How can a monopolist charge different prices to different customers?
A monopolist has market power, this means that they can set the market price of a good through restricting output. A monopolist can charge different prices to different customers through price discrimination. Assumptions are made that they monopolists objective is to maximise profits. A monopolists profit maximising strategy is to charge different prices to different consumers varying on the price elasticity between them. This will extract the maximum consumer surplus, and thus maximise profits. To price discrimiate there must also be some degree of barriers to prevent consumers for switching suppliers. A common strategy of price discrimination is giving students a discount, this is because students are normally more sensitive to prices due to their low income. Students may only buy a product if a discount is given, so the firm provides a discount in order to make these sales.
What happens to a monopolistically competitive firm that begins to charge an excessive price for its product?
Consumers will substitute with a rival's product.
What happens to monopolistically competitive firm that begins to charge an excessive price for its product?
Consumers will substitute with a rival's product.
What happens to monopolistic competitive firm that begins to charge an excessive price for its product?
Consumers will substitute with a rival's product.
What is a negative feature of a free market?
Businesses may charge their own prices and may also form monolpolies. Without government regulation, a single firm could control one product and charge the consumer higher than what it is worth to maximize its own profit. (especially if the product is considered essential for living)
What happens to a monopolistically competitive firm that begins to charge an excessive price for it's product?
Consumers will substitute a rival's product.
What is a negative feature of free-marketing economy?
Businesses may charge their own prices and may also form monolpolies. Without government regulation, a single firm could control one product and charge the consumer higher than what it is worth to maximize its own profit. (especially if the product is considered essential for living)
What best protect firm form being forced to sell its product unfairly low prices?
A strong government BEST protects a firm from being forced to sell its product at an unfairly low price.
What firms could raise prices and expect an increase in revenus?
a firm whose product has an elasticity of 0.31
How can a monopolist charge different prices to different customers?
A monopolist has market power, this means that they can set the market price of a good through restricting output. A monopolist can charge different prices to different customers through price discrimination. Assumptions are made that they monopolists objective is to maximise profits. A monopolists profit maximising strategy is to charge different prices to different consumers varying on the price elasticity between them. This will extract the maximum consumer surplus, and thus maximise profits. To price discrimiate there must also be some degree of barriers to prevent consumers for switching suppliers. A common strategy of price discrimination is giving students a discount, this is because students are normally more sensitive to prices due to their low income. Students may only buy a product if a discount is given, so the firm provides a discount in order to make these sales.
What does Creaming the market mean?
Creaming the market is when a firm or business may charge a very high price for a certain product. The firm will continue to charge a very high price until rival products appear.
What happens to a monopolistically competitive form that begins to charge an excessive price for its product?
When a monopolistically competitive firm charges an excessive price for its product, it risks losing customers to competitors offering similar products at lower prices. This price increase may lead to a decrease in demand, as consumers seek alternatives. In the long run, if the firm continues to maintain high prices without enhancing product quality or differentiation, it could see a decline in market share and profitability, ultimately prompting it to adjust its pricing strategy to remain competitive.
What does a firm's supply curve for a good indicate?
A firm's supply curve for a good indicates the quantity of that good the firm is willing and able to produce and sell at different prices.
