Suppose a Profit-Maximizing Monopoly Is Able to Employ Group Price

question 28

Multiple Choice

Suppose a profit-maximizing monopoly is able to employ group price discrimination. The marginal cost of providing the good is constant and the same in both markets. The marginal revenue the firm earns on the last unit sold in the market with the lower price will be

• A)greater than the marginal revenue the firm earns on the last unit sold in the market with the higher price.
• B)less than the marginal revenue the firm earns on the last unit sold in the market with the higher price.
• C)equal to the marginal revenue the firm earns on the last unit sold in the market with the higher price.
• D)greater than the marginal cost of the last unit.

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Definitions:

U.S. Treasury Note

A marketable U.S. government debt security with a fixed interest rate and a maturity between one and ten years.

Accrued Interest

The interest that has accumulated on a bond or other fixed-income security since the last interest payment was made.

Settlement

The process of exchanging payment for financial transactions, including securities, at their completion.

Semiannual Coupon

Bonds that pay interest to the holder twice a year.