Question

When the cost of a resource is sunk, then the dual price can be interpreted as the:

a) maximum amount the firm should be willing to pay for multiple additional units of the resource.

b) minimum amount the firm should be willing to pay for multiple additional units of the resource.

c) maximum amount the firm should be willing to pay for one additional unit of the resource.

d) minimum amount the firm should be willing to pay for one additional unit of the resource.

Answer 1

C. Maximum amount the firm should be willing to pay for one additional unit of the resource.

Step-by-step explanation:

Dual pricing is similar to price discrimination. It is said to be the practice of setting different prices in different markets for the same product or service. This tactic may be used by a business for a variety of reasons, but it is most often an aggressive move to take market share away from competitors.

Dual pricing is illegal only when it can be proved that a manufacturer set prices unrealistically low for the purpose of unfairly driving out competition.

And in a case where the cost of a resource is been sunk, dual price is interpreted as the maximum amount the firm should be willing to pay for one additional unit of the resource.