62.4k views
4 votes
If the firm wanted to implement price discrimination, which consumer group would be charged the lowest price?

A) High-income consumers
B) Middle-income consumers
C) Low-income consumers
D) All consumers would be charged the same price

User Sushanth
by
8.0k points

1 Answer

2 votes

Final answer:

Low-income consumers would be charged the lowest price in price discrimination. This makes sense as they are more price-sensitive, whereas high-income consumers can be charged higher prices. In perfect price discrimination, no consumer surplus exists, with each paying exactly their product valuation.

Step-by-step explanation:

If a firm wanted to implement price discrimination, the consumer group that would be charged the lowest price would most likely be C) Low-income consumers. This is because price discrimination involves charging different prices to different consumers based on their willingness or ability to pay.

Typically, low-income consumers have less disposable income and are more price-sensitive, which means that in order to sell to this group, the firm must offer a lower price. In contrast, high-income consumers are generally less price-sensitive and can be charged higher prices.

The scenario described as perfect price discrimination is one where the monopolist produces more output—similar to that of a perfectly competitive industry. However, each consumer pays the exact amount they value the product, leaving no consumer surplus and therefore allowing the monopolist to earn maximum profits. Thus, in a situation of perfect price discrimination, prices are not uniform across all consumers.

User Darek
by
8.5k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.