Price Discrimination Quiz

Which of the following is the best definition of price discrimination?

• Charging different prices for different products based on cost differences

• Charging different prices to different consumers based on willingness to pay

• Selling identical goods at the same price to all customers

• Setting prices below marginal cost to eliminate competition

Which of the following conditions must be met for a firm to successfully price discriminate?

• I only

• I and II only

• II and III only

• I, II, and III

Which of the following is an example of first-degree price discrimination?

• Charging seniors lower prices for movie tickets

• Charging each consumer the maximum they are willing to pay

• Offering discounts for bulk purchases

• Charging different prices in different geographical locations

Second-degree price discrimination occurs when firms charge different prices based on:

• The individual consumer’s willingness to pay

• The consumer’s age or identity

• The quantity of goods purchased

• The location of purchase

Third-degree price discrimination is most commonly seen in:

• Auctions where consumers bid different amounts

• Coupons offered to all customers

• Discounts based on consumer characteristics, such as student or senior discounts

• Charging customers different prices based on their individual willingness to pay

A firm is more likely to engage in price discrimination if:

• Consumers can easily resell the product

• There is a perfectly competitive market

• It has market power and can separate consumers into groups

• It faces a perfectly elastic demand curve

Airlines charging different prices for tickets based on when they are purchased is an example of:

• First-degree price discrimination

• Second-degree price discrimination

• Third-degree price discrimination

• Price gouging

Which of the following is NOT a necessary condition for price discrimination to occur?

• Market power

• Identical marginal costs for all consumers

• Prevention of arbitrage (resale)

• Different price elasticities of demand among consumers

If a firm practices first-degree price discrimination, its consumer surplus is:

• Maximized

• Zero

• Equal to producer surplus

• Greater than producer surplus

A common example of second-degree price discrimination is:

• Senior citizen discounts

• Bulk discounts for purchasing larger quantities

• Charging foreign tourists higher prices

• Setting the same price for all consumers