Question

A. First-degree price discrimination involves a firm charging different prices:

a. based on the firm's ability to segment the market into two or more groups
b. to each customer based on race, religion, or other individual characteristic.
c. to each customer based on his or her willingness and ability to p
d. based on the quantity of a good or service purchased. 0.14 points

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

a. A hotel offering a promotion where customers submit the price they are willing to pay for a one-night stay
b. A big-box store offering a discount for people who order products in bulk
c. A fast-food restaurant offering a student 10% off for showing her student ID
d. A park refusing to allow entrance to those with pets.

Answer 1

A) = c.) To each customer based on his or her willingness and ability to pay

B) = a. A hotel offering a promotion where customers submit the price they are willing to pay for a one-night stay

Step-by-step explanation:

A)

First degree price discrimination is also known as the perfect price discrimination. The firm here is able to charge a different price to each individual, taking advantage of each persons' consumer surplus and maximizing the producer surplus. Therefore the correct answer is C for the first part.

B)

Since the hotel is able to charge each individual a separate price as per each consumers' own willingness to pay thus this is an example of perfect price discrimination as each individual will be paying a separate price.

Hope that helps.