Question

A firm practicing third-degree price discrimination may:

I. segment its customers by age, such as offering senior citizen discounts.
II. charge customers living in certain zip codes a higher price than customers living in other locations.
III. initially charge high prices and then reduce the price over time to sell to the more price-sensitive consumers.

(A) I
(B) I and II
(C) II
(D) I, II, and III

Answer 1

(B) I and II

Step-by-step explanation:

Price discrimination is when a producer charges different prices for his good or service.

Third degree price discrimination is when consumers are charged different prices for the same good due to certain factors. E.g. age, gender, location.

Second degree price discrimination is when consumers who buy in bulk are given discounts.

First price discrimination is when consumers are charged different prices according to their willingness to pay. Example of first price discrimination is initially charging high prices and then reducing the price over time to sell to the more price-sensitive consumers.

I hope my answer helps you.