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Chapter 24: Q. 2FCT (page 551)

Is there any economic difference between a customer loyalty-card program offered by a legitimate drugstore and the program established by the Marseilles drug dealer?

Short Answer

Expert verified

Drug dealers in Marseilleare giving their customers loyalty cards offering discounts for repeat customers

Step by step solution

01

Introduction

Cards offer stamp system like cafes offeringa reduction for tenth purchase. Also show opening hours and message thanking customers for loyalty. Neighborhood has major drugs problem and dealers say sales increased. Angry resident says the scheme proves it'sa part where 'anything goes'.

02

Given Information

Drug dealers in Marseille are giving their customers loyalty cards offering discounts for repeat customerstogether with opening hours and a courteous message.

03

Explanation

The dealersare handing out cards explaining thatthey're open from 11am until midnight with a polite footer saying 'Weexpect to seeing youround the neighborhood, thanks for your loyalty'.

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Most popular questions from this chapter

Suppose that in Figure 24-4, the monopolist knows that if it were to reduce the price of its product to $5.40 per unit, the quantity demanded-and hence its output-would rise to 13 units per week. What would be the marginal revenue that the monopolist would derive from producing and selling a 13th unit?

A monopolist's revenues vary directly with price. Is it maximizing its economic profits? Why or why not? (Hint: Recall that the relationship between revenues and price depends on price elasticity of demand.)

How does the act of forbidding competitors such as Andria and Zoey from selling cold drinks on the street affect the prices that legally licensed sellers can obtain for their cold drinks?

A monopolist's marginal cost curve has shifted upward. What is going to happen to the monopolist's price, output rate, and economic profits?

Use the following graph to answer the questions that follow,

a. What is the monopolist's profit-maximizing output?

b. At the profit-maximizing output rate, what are average total cost and total revenue ?

c. At the profit-maximizing output rate, what are the monopolist's total cost and total revenue?

d. What is the maximum profit?

e. Suppose that the marginal coot and average total cost curves in the diagram also illustrate the horizontal summation of the firms in a perfectly competitive industry in the long run. What would the equilibrium price and output be if the market were perfectly competitive? Explain the economic cost to society of allowing a monopoly to exist.
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