BROTHE 10. The entrepreneur\'s prices and profits Simone is an entrepreneur who
ID: 1128337 • Letter: B
Question
BROTHE 10. The entrepreneur's prices and profits Simone is an entrepreneur who has recently developed and begun selling drink like it on the market. Currently, Simone is deciding how much to charge for each bottle. a new zero-calorie alcoholic beverage called synthehol. There is no other Macintosh True or False: Despite the up-front R&D; costs of developing synthehol, if Simone sells each bottle at a price that is greater than the marginal cost of the last bottle (P > MC), it is possible for her to earn positive economic profits. True O False Simone has determined that her customers fall into two categories: consumers aged 21-35 and consumers aged 36-50. The demand and marginal revenue (MR) curves for these two categories of customers are depicted in the following graph, along with Simone's marginal cost (MC) of producing synthehol, which is the same for both groups. Use the graph to answer the questions that follow Mac Vide SD B Market for Synthehol, Ages 36-50 Market for Synthehol, Ages 21-35 10 10 SessionExplanation / Answer
Despite the up-front R&D costs of developing synthehol, if simone sells each bottle at a price that is greater than the marginal cost of the last bottle (P>MC) , it is possible for her to earn positive economic profits. TRUE. Because Simone has the monopoly power , so she charges price where MR=MC . So, price must be greater then MC.
Assuming that she has perfect information regarding the age of each customer she sells to, to maximise profits Simone will charge a price of $ 6 per bottle because we can see from the graph for aged 36-50 , when MR=MC then, price = $6. And a price of $4 per bottle because we can see from the graph for aged 21-35, when MR=MC, then price=$4 per bottle.
Under the pricing structure , Simone is practicing discriminatory pricing . TRUE because simone is charging from each customer the different prices. Like $6 per bottle from aged 36-50 group and $4 from aged 21-35 group.
in theory , if Simone is earning a positive economic profits from the sale of synthehol and the market is perfectly competitive , other enterpreneurs will enter the market and drive prices down until total revenues for each producer are just enough to cover all costs including R&D costs.The result is zero economic profits for enterpreneurs in this market, on average.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.