Question

Which is not true of price discrimination?Multiple Choice

a)Successful price discrimination requires that different segments of the market have different demand elasticities.
b)Successful price discrimination will provide the firm with more profit than if it does not discriminate.
c)Successful price discrimination implies that the producer can separate customers into easily identifiable groups.
d)Successful price discrimination will generally result in a lower level of output than would be the case under a single-price monopoly.

Answer 1

d) Successful price discrimination can actually result in a higher level of output because firms can capture additional consumer surplus by charging higher prices to customers with higher willingness to pay.

Step-by-step explanation:

Price discrimination is a strategy used by firms to charge different prices to different groups of customers based on their willingness to pay. While all the options in the multiple-choice question may be true of price discrimination, the option that is not true is (d) Successful price discrimination will generally result in a lower level of output than would be the case under a single-price monopoly. Successful price discrimination can actually result in a higher level of output because firms can capture additional consumer surplus by charging higher prices to customers with higher willingness to pay. For example, airlines offer different price points to different customer segments such as business travelers and leisure travelers, allowing them to sell more seats at different prices and increase their overall output.