Author Question: Here are three possible definitions of Compensating Variation: I. the amount a person would be ... (Read 14 times)

nummyann · **on:** Jul 1, 2018

Here are three possible definitions of Compensating Variation: I. the amount a person would be willing to pay to avoid a price increase. II. the amount of additional income needed to allow a person to restore his or her utility back to its initial level after it has been reduced by a price increase. III. the amount of income that a person who experienced a price increase would be willing to pay to see the price return to its earlier level. Which of these definitions is (are) correct?
a. Only I
b. I and II
c. II and III
d. Only III

Question 2

The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of:
a. inverted block pricing
b. second-degree price discrimination
c. peak-load pricing
d. first-degree price discrimination
e. none of the above