Question

First-degree price discrimination involves a firm charging different prices: a. to each customer based on race, religion, or other individual characteristic. b. based on the quantity of a good or service purchased. c. based on the firm's ability to segment the market into two or more groups. d. to each customer based on his or her willingness and ability to pay.

Answer 1

Option (D) is correct.

Step-by-step explanation:

There are three types of price discrimination:

(i) First degree price discrimination

(ii) Second degree price discrimination

(iii) Third degree price discrimination

The first degree price discrimination is also known as perfect price discrimination. In this type of price discrimination, firms charges different prices from different customers and these prices are based on the willingness of the customers.

For example, if the consumer's willingness to pay for a certain product is $10. So, the firms will charge a price $10 for their product from this customer.