ECON4333 Government Regulations and Price Discrimination Assignment just to earn the best grade you can on this assignment! ECON 4333-001 Spring 2019 Homew

ECON4333 Government Regulations and Price Discrimination Assignment just to earn the best grade you can on this assignment! ECON 4333-001
Spring 2019
Homework Assignment 3
This assignment is due on Friday, April 26 by 11:59 p.m. Send as an email attachment to
crbrown@astate.edu, or fax to 870-972-3417.
$
Figure 1: Bijou Theater
A
5
X
MC
DK
B
4
W
H
S
Y
2
L
MRK
Kids
DT
DA
3
Z
G
28
38
MC
MRT
MRA
20
10
0
20
Adults
1. This question is based on Figure 1.
a. If the Bijou Theatre did not engage in 3rd degree price discrimination, then the price of a
ticket would be $______ , there would be _______ kid patrons and ______ adult
patrons and total revenue from the sale of tickets would be $_______.
b. If the Bijou did engage in 3rd degree price discrimination, then the price of a kid ticket
would be $_____, the price of an adult ticket would be $______.
c. Other things being equal, the practice of price discrimination would increase the total
surplus (TS) if area
was greater than area
.
d. By practicing price discrimination, the Bijou can increase its profits by $
.
2. What is tying? When does the practice of tying run afoul of the antitrust statutes? The Supreme
Court ruled in the Eastman Kodak v. Image Technical Services [ 504 U.S. 451 (1992)] that
Eastman Kodak’s practice of withholding access to replacement parts for its volume copiers and
micrographic equipment from independent service organizations (ISOs) gave its own service
division an unfair, and illegal, advantage in the “after market for repair services.” Review the
dissent of Justice Scalia (this is toward the end of the case). Why did this case fail to meet the
test for illegal tying, according to Justice Scalia?
3. If a large firm is found to possess monopoly power, what else is needed to find the firm guilty of
monopolization? Why is possessing monopoly power insufficient for illegality? Explain the
relevance of the “applications barrier to entry” in the Microsoft case. What strategies did
Microsoft employ, according to the Justice Department, to preserve the applications barrier?
4. Suppose the upstream supplier of wearable virtual reality technology has instituted a new
minimum resale price for its product.
Which of the following is a procompetitive argument for allowing this pricing behavior?
A. There are no procompetitive arguments for RPM policies as they are per se illegal.
B. Disallowing lower prices will foster competition among retailers who will compete in the
quality of other goods offered.
C. Disallowing lower prices will keep other firms from free-riding on the customer service of
firms that allow customers to test out the new technology.
D. Disallowing lower prices will guarantee that there is no collusion among downstream retailers
to set higher prices and extract excess consumer surplus.
5. Suppose that a firm has marginal costs of $20, and the firm faces an own-price elasticity of
demand of −3.25. In this market, firms maximize profit at a price of ________ and have a Lerner
index of ________.
A. $26.15; 0.31
B. $29.00; 0.45
C. $33.86; 0.31
D. $36.15; 0.45
6.
Due to the extensive growing necessities of cane, only a few firms are able to supply it for
clarinet reed manufacturers, who use it for their product. Suppose that one of the reed
manufacturing companies decides to purchase cane from a single cane company. What is this an
example of?
A. product tying
B. exclusive dealing
C. territorial restraint
D. resale price maintenance

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