The authors explain that the marginal cost of production does not have to be constant in order to maximize profits under intemporal price discrimination.
Which of the following is NOT an example of changing marginal costs under profit-maximizing intertemporal price discrimination? A) Marginal cost increases sharply after the initial marketing stages when the product is sold to the broader market of consumers.
B) Marginal costs decline over time due to learning-by-doing.
C) Marginal costs decline over time because the producer sells less expensive versions of the product in later stages of marketing (e.g., hard-cover versus paper-cover books).
D) Marginal costs decline over time due to economies of scale.
Question 2
Assume that a firm's production process is subject to increasing returns to scale over a broad range of outputs. Long-run average costs over this output will tend to
A) increase.
B) decline.
C) remain constant.
D) fall to a minimum and then rise.
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