Blammo Industries is a profit maximizer that sells custom made hats and is the only producer in a market. It charges some customers more than other customers because the hats bought by some buyers cost Blammo more to produce than the hats purchased by other buyers.

Based on this information, each statement below is true EXCEPT
Choose 1 answer:
(A) Blammo Industries operates in an industry with barriers to entry.
(B) Blammo Industries is a price discriminating monopolist.
(c) Blammo industries does not have a constant marginal cost curve
(D) Blammo Industries has a downward sloping demand curve.
(E) Blammo industries will produce the quantity where marginal cost equals marginal revenue

Question

Blammo Industries is a profit maximizer that sells custom made hats and is the only producer in a market. It charges some customers more than other customers because the hats bought by some buyers cost Blammo more to produce than the hats purchased by other buyers.

Based on this information, each statement below is true EXCEPT
Choose 1 answer:
(A) Blammo Industries operates in an industry with barriers to entry.
(B) Blammo Industries is a price discriminating monopolist.
(c) Blammo industries does not have a constant marginal cost curve
(D) Blammo Industries has a downward sloping demand curve.
(E) Blammo industries will produce the quantity where marginal cost equals marginal revenue

Accepted Answer

∻Solution∻ ‖ a ⋮ Interpretation of the Question: The question asks to identify the statement that is NOT true about Blammo Industries based on the given information. ‖ ‖ b ⋮ Analysis of Statements: - Statement (A) suggests that there are barriers to entry, which is likely true for a monopolist. - Statement (B) indicates that Blammo Industries is a price discriminating monopolist, which is consistent with the information provided. - Statement (C) implies that Blammo Industries does not have a constant marginal cost curve. Since the firm charges different prices due to different production costs, this suggests varying marginal costs. - Statement (D) asserts that Blammo Industries has a downward sloping demand curve, which is typical for a monopolist. - Statement (E) states that Blammo Industries will produce the quantity where marginal cost equals marginal revenue, which is a condition for profit maximization in monopoly and price discrimination scenarios. ‖ ∻Answer∻ ⚹ Statement (C) is NOT true because varying production costs leading to price discrimination do not necessarily imply that the marginal cost curve is not constant. A firm can have a constant marginal cost curve and still engage in price discrimination based on other factors such as willingness to pay, not just production costs. ⚹ ∻Key Concept∻ ⚹ Price Discrimination and Marginal Cost ⚹ ∻Explanation∻ ⚹ Price discrimination involves charging different prices to different consumers and does not inherently mean that the firm's marginal cost curve is not constant. Marginal cost can remain constant while prices vary due to differences in consumer willingness to pay or other forms of market segmentation. ⚹◊What are the implications of price discrimination by firms like Blammo Industries on market efficiency and consumer welfare in the context of macroeconomics?⍭ Generate me a similar question◊

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