Question

Neha is an entrepreneur who has recently developed and begun selling a new zero-calorie alcoholic beverage called glingue. There is no other drink like it on the market. Currently, Neha is deciding how much charge for each bottle. True or False: Given the -front R&D costs of developing glingue, if Neha sells each bottle ta price that is equal to the marginal cost of the last bottle (P MC), it is possible for her to earn positive economic profits. True OFalse ined that her customers fall into two categories: consumers aged 21-35 and consumers aged 36-50. The demand and marginal Neha has deter revenue (MR) curves for these two categories f customers are depicted in the following graph, along with Neha's marginal cost (MC) of producing glingue, which is the same for both groups. Use the graph to answer the questions that follow. Market for Glingue, Ages 36-50 Market for Glingue, Ages 21-35 15 Run script "jumpTo('/af/servlet/quiz?ctx=vcela 3-0054&quiz_action=showContents&quiz_psetGuid=PSETCOA801010000004C129970020000')y" R BOTTLE (D le munal R BOTTLE ( *CENGAGE MINDTAP Aplia Homework: Labor and Entrepreneurship: The Human Inputs mal Aet IUI ngue, Ays 1-3 maInet UI ungue, Ayes Ju-u 10 9 9 MC МС Demand Demand MR MR 5 6 QUANTITY (Bottles of glingue per week) 2 5 6 8 9 10 7 8 9 10 1 QUANTITY (Bottles of glingue per week) price of $ Assuming she has perfect information regarding the age of each customer she sells to, to maximize profits Neha will charge per bottle to consumers aged 36-50 and a price of per bottle to consumers aged 21-35. practicing discriminatory pricing. (Hint: You can assume the cost of producing and providing True of False: Under this pricing structure, Neha glingue is the same for both groups of customers.) True OFalse In theory, Neha is earning a positive economic profit from the sale glingue and the market is perfectly competitive, other entrepreneurs will enter the market and drive prices until total revenues for each producer are just enough to cover all costs, R&D costs. The result is economic profits for entrepreneurs in this market, on average. Run script "jumpTo('/af/serviet/quiz?ctx=vcela3-0054&quiz_action=showContents&quiz_psetGuid=PSETCOA801010000004C129970020000')" PRICE P ER BOTTLE PRICE PER BOT sJeIon

Answer 1

The statement is false (economic profits would be negative)

Neha will charge a price of $ 4 per bottle to consumers aged 36-50 and a price of $ 4 per bottle to consumers aged 21-35. (profit is maximized at this price level as MR = MC at the corresponding quantity)

Statement is false (same price is being charged)

Other entrepreneurs 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 entrepreneurs in this market, on average.