Question 55 (1 point)

A vertically integrated firm has 2 divisions; upstream and downstream divisions. The upstream division produces chemical Y, whose average total cost is ATC_U = 10 + 2Q_U, where Q_U is the quantity of Y. The downstream division has its own average total cost of ATC = 20 + 3Q where Q is the quantity of the firms final product. There is no external market. What is the transfer price (P_U)?

Question 55 options:

	PU = 10 + 2QU.
	PU = 10 + 4QU.
	PU = 20 + 3QU.
	PU = 20 + 6QU.
	None of the above.

Question 56 (1 point)

Which of following statements is TRUE?

Question 56 options:

	A coffee shop sells a small cup of coffee for $3, while a large cup, which is twice as big, is $5. This is an example of third-degree price discrimination.
	A perfect price discrimination creates a deadweight loss.
	If a market is controlled by a perfect price discrimination, then consumer surplus is the same as under perfect competition.
	When a monopolist engages in perfect price discrimination, the average revenue curve lies below the demand curve.
	None of the above.

Question 57 (1 point)

A market demand of a product is such that if the price is $4, the quantity demanded is 16 units. For each $1 increase in the price, the quantity demanded decreases by 2 units. If the market demand is a linear function, for what range of prices is the marginal revenue positive?

Question 57 options:

	$24 < P < $12.
	$20 < P < $10.
	$12 < P < $6.
	$10 < P < $5.