#1
In the context of economics, what is price discrimination?
Charging different prices to different customers for the same good or service
ExplanationCustomized pricing for various customers of a common product.
#2
Which of the following is a potential benefit of price discrimination for a firm?
Higher average revenue
ExplanationElevated overall revenue due to tailored pricing for different market segments.
#3
Which type of price discrimination involves charging different prices based on the quantity purchased by a customer?
Second-degree price discrimination
ExplanationPricing differentiation based on the quantity of goods purchased by a customer.
#4
What is the primary motivation for a firm to engage in price discrimination?
To capture as much consumer surplus as possible
ExplanationMaximizing revenue by capturing the additional value consumers are willing to pay.
#5
Which of the following is a common type of price discrimination?
First-degree price discrimination
ExplanationSetting a unique price for each customer based on their willingness to pay.
#6
What is the primary goal of profit maximization for a firm engaging in price discrimination?
Maximizing total profit
ExplanationOptimizing revenue across customer segments for maximum overall profit.
#7
What is an example of third-degree price discrimination in the real world?
Student discounts on public transportation
ExplanationOffering different prices to student and non-student segments.
#8
Why might a firm engage in first-degree price discrimination?
To capture all consumer surplus
ExplanationCustomized pricing to extract the maximum value from each customer.
#9
Which condition must be met for successful price discrimination to occur?
Different elasticities of demand among customer groups
ExplanationVariation in demand sensitivity among customer categories is essential for effective price discrimination.
#10
What is the term used to describe the price discrimination strategy where a company charges the highest price to consumers who are willing to pay more?
Third-degree price discrimination
ExplanationSetting prices based on consumer willingness to pay, often linked to demographic factors.
#11
What is an essential condition for successful second-degree price discrimination?
Identical demand curves
ExplanationUniform demand curves among different customer groups are necessary for effective price discrimination.
#12
In the context of price discrimination, what does the term 'arbitrage' refer to?
Exploiting price differences in different markets
ExplanationTaking advantage of pricing disparities in separate markets.