Question

A market is more efficient, and society is better off, whenever a price-making firm is able to price-discriminate, even when consumer surplus is converted to producer surplus. Click or tap "True" or "False" to answer the question.

A) True
B) False

Answer 1

This statement is true.

Step-by-step explanation:

Price discrimination is the action of selling the same product, at a variety of prices, depending on the customer.

The most common type of this is third-grade price discrimination. In this case, the company doesn't know its customers but can classify them in several categories such as age, sex, social position, acquisitive power, monthly income and more.

By doing this, a company can adapt its price range to different kinds of customers. For example, a movie theater sells tickets at a regular price of $10 but may sell them at 50% off to highschool students, because most students have limited incomes that often depend on their parents. The movie theater will then get more sales, and the price range will be more accessible to more people.