Which of the following is true if a firm is able to price discriminate? The firm’s economic profit
What must be true for a firm to be able to price-discriminate?
Three factors that must be met for price discrimination to occur: the firm must have market power , the firm must be able to recognize differences in demand, and the firm must have the ability to prevent arbitration, or resale of the product.
Which one of the following is an example of price discrimination?
selling the same product at two different prices in two different markets. Which of the following is an example of price discrimination? ... A top performing used car salesman is able to sell his cars to each customer at their maximum willing to pay , a practice known as: perfect price discrimination.
Which of the following is true about successful price discrimination?
Which of the following is true about successful price discrimination? It provides the company with higher total revenue than if the firm did not price discriminate . ... Demand is price elastic.
Which of the following is not an example of price discrimination?
The correct answer is D. Charging the same price to everyone for a good or service is not price discrimination.
What are the 3 types of price discrimination?
There are three types of price discrimination: first-degree or perfect price discrimination, second-degree, and third-degree .
What are the conditions of price discrimination?
Price discrimination is possible under the following conditions: The seller must have some control over the supply of his product . Such monopoly power is necessary to discriminate the price. The seller should be able to divide the market into at least two sub-markets (or more).
Is price discrimination Good or bad?
Price discrimination can provide benefits to consumers, such as potentially lower prices , rewards for choosing less popular services and helps the firm stay profitable and in business. The advantages of price discrimination will be appreciated more by some groups of consumers.
What are the features of monopolistic competition?
- Large Number of Sellers: There are large numbers of firms selling closely related, but not homogeneous products. ...
- Product Differentiation: ADVERTISEMENTS: ...
- Selling costs: ...
- Freedom of Entry and Exit: ...
- Lack of Perfect Knowledge: ...
- Pricing Decision: ...
- Non-Price Competition:
How do you calculate first degree price discrimination?
The firm extracts every dollar of surplus available in the market by charging each consumer the maximum price that they are willing to pay. First degree price discrimination results in levels of producer surplus and consumer surplus PS1 and CS1, as shown in equation 4.1. (4.1) PS1 = PS0 + CS0; CS1 = 0.
What do you mean by price discrimination when is it possible and profitable?
Price discrimination arises when a firm sells its (homogeneous) product at different prices at the same time . The monopolist is able to sell his product in some situations in two or more markets at different prices and thereby increases his profit.
Under what conditions can sellers engage in price discrimination quizlet?
sellers engage in price discrimination when they charge different prices to different consumers for the same good . it is profit-maximizing to charge higher prices to low-elasticity consumers and lower prices to higher-elasticity ones.
What are two examples of monopolies?
A monopoly is a firm who is the sole seller of its product, and where there are no close substitutes. An unregulated monopoly has market power and can influence prices. Examples: Microsoft and Windows, DeBeers and diamonds, your local natural gas company .
What is the type of market in which there is no competition?
An imperfect market refers to any economic market that does not meet the rigorous standards of the hypothetical perfectly—or purely—competitive market.
What are characteristics of a perfectly competitive market?
A perfectly competitive market is characterized by many buyers and sellers, undifferentiated products , no transaction costs, no barriers to entry and exit, and perfect information about the price of a good. The total revenue for a firm in a perfectly competitive market is the product of price and quantity (TR = P * Q).
What is intertemporal price discrimination?
Intertemporal price discrimination provides a method for firms to separate consumer groups based on willingness to pay . The strategy involves charging a high price initially, then lowering price after time passes. Many technology products and recently- released products follow this strategy.
