c) An imperfectly competitive external market for the
intermediate product exists?
Discussion Question 13: What are:
a) The advantages of cost-plus pricing?
b) The disadvantages of cost-plus pricing?
c) Why is incremental cost pricing the correct pricing
method? Why is full-cost pricing equal to it?
Problem 5
The Dairy Farm Company, a small producer of milk and
cheese, has estimated the quantities of milk and cheese
that it can produce with three levels of total expenditures
or total costs. These are indicated in the following table. If
the price of milk (product A) and the price of cheese
(product B) that the firm receives are $ 1 each per unit of
the products, draw a figure showing the maximum total
profi t (p) that the firm can earn at each level of TC and
the overall maximum profit that the firm can earn for the
three different levels of TC.
Problem 12:
a) Will a monopolist’s total revenue be larger with second-
degree price discrimination when the batches on which it
charges a uniform price are larger or smaller? Why?
b) How does a two-part tariff differ from bundling?
Spreadsheet Problem 1: Using a spreadsheet like the
following, entering formulas for the total revenue and