Question

Price discrimination is usually defined as selling a product to different customers at ___.

A. The same price even though costs of service are different.
B. Different prices even though costs of service are the same.
C. The same price as costs of service are the same.
D. Diffetent prices as costs of service are different

Answer 1

Price discrimination is the practice of selling a product to different customers at different prices based on their willingness to pay. Perfect price discrimination occurs when a monopolist charges each buyer their individual maximum willingness to pay, resulting in maximum profits but no consumer surplus.

Step-by-step explanation:

In price discrimination, a firm sells a product to different customers at different prices based on their willingness to pay. The correct option is B. Different prices even though costs of service are the same. Price discrimination allows firms to maximize their profits by charging higher prices to customers with a higher willingness to pay and lower prices to customers with a lower willingness to pay.

For example, airlines often practice price discrimination by offering different ticket prices for economy class, business class, and first class seats, even though the costs of service are similar for all passengers.

1. Perfect price discrimination: This is a scenario where a monopolist charges each buyer their individual maximum willingness to pay. This results in the monopolist earning the maximum possible profits, but there is no consumer surplus as each buyer is paying what they think the product is worth.