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Chapter 11: Problem 14

Which statement is true about perfect price discrimination? (LO4) a) It is very common. b) It is illegal. c) The larger the market, the more likely one is to find it. d) None of the above.

Short Answer

Expert verified
The correct answer is option D: None of the above. Each of the presented statements A, B, and C are not true about perfect price discrimination.

Step by step solution

01

Understanding Perfect Price Discrimination

Perfect price discrimination, also known as first-degree price discrimination, occurs when a firm charges each consumer the maximum price they are willing to pay for a good or service. In this situation, the firm captures all consumer surplus, leaving consumers with no surplus. Now let's analyze each option:
02

Option A: It is very common.

In reality, perfect price discrimination is not very common, as it is difficult for firms to gather enough information about each consumer's willingness to pay and preferences. Additionally, implementing perfect price discrimination can be costly and complicated.
03

Option B: It is illegal.

Price discrimination, in general, can be illegal if it violates antitrust or discrimination laws. However, perfect price discrimination is not inherently illegal. Its legality depends on the specific conditions under which it is implemented and whether it's violating any laws.
04

Option C: The larger the market, the more likely one is to find it.

The likelihood of finding perfect price discrimination is not necessarily tied to the market's size. In fact, it can be more challenging to implement perfect price discrimination in a larger market due to the difficulty in gathering accurate information about each consumer's willingness to pay and creating personalized pricing for a vast number of consumers.
05

Option D: None of the above.

Since options A, B, and C are not true statements about perfect price discrimination, the correct answer is option D: None of the above.

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Most popular questions from this chapter

Which statement is true? (LO3) a) When you decide which doctor to go to, your only concern is the quality of the medical service you will receive. b) People differentiate among goods and services based not only on physical differences but also on ambience, convenience, and service. c) Monopolistic competitors are usually large firms. d) None of the above.

Each of the following is an example of price discrimination except _____. a) airline "youthfares" b) higher-price movie tickets after 5:00 p.m. and on weekends c) doctors charging more to patients who need lab tests d) A\&P's old grades A, B, and C

Under perfect price discrimination _____. a) consumer surplus is zero b) consumer surplus is maximized c) consumer surplus is a constant no matter what price is charged d) consumer surplus rises as price is lowered

In the long run in monopolistic competition _____. a) most firms make a profit b) the absence of entry barriers ensures that there are no profits c) economies of scale ensure that there are no profits d) most firms lose money

Which statement is true? a) Most firms in the United States are monopolistic competitors. b) Most firms in the United States are perfect competitors. c) Most consumers would prefer lower prices and less product differentiation. d) None of the above.
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