Consider Two Firms, a and B, That Are Producing the Same

question 63

Multiple Choice

Consider two firms, A and B, that are producing the same product but with different marginal costs. In this case,

• A) neither firm is producing its output at the lowest attainable cost.
• B) each firm is being wasteful.
• C) a reallocation of output between the firms can lower the industry's total cost.
• D) one firm is not maximizing profits.
• E) some resources must be unemployed.

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Definitions:

Two-part Tariff

A pricing strategy that consists of a fixed fee plus a variable usage fee, common in services like utilities.

Entry Fee

An initial charge required to gain access to a service, event, or establishment.

Tying

Practice of requiring a customer to purchase one good in order to purchase another.

Price Discrimination

The strategy of selling the same product at different prices to different groups of buyers, often based on their willingness to pay.