Price Discrimination

Question 1

Price discrimination

Answer 1

Firm is able to charge a diffrent price for the same good or service in diffrent markets

Can be done based on factors such as time, place or income

Question 2

What are the 3 conditions for price discrimination to take place ?

Answer 2

Monopolist must face different demand curves firm diffrent groups of buyers

Monopolist must split markets into distinct group of buyers

Monopolist must keep markets separate at relatively low costs

Question 3

First degree price discrimination

Answer 3

Charging every customer the max amount that they are prepared to pay

Monopolist converts all consumer surplus to producer surplus

Question 4

Second degree price discrimination

Answer 4

Selling off packages of a product at a lower price compared to when it was previously advertised

E.g last minute flights

Question 5

Third degree price discrimination

Answer 5

Monopolists splits customers in 2 or more Separate groups

Question 6

What do firms earn more of when there is price discrimination?

Answer 6

Economic profit , and so they profit maximise

Question 7

What do firms earn more of when there is price discrimination?

Answer 7

Economic profit , and so they profit maximise