Question

1. Explain how each of the following is a form of price discrimination.? a. a student...

1. Explain how each of the following is a form of price discrimination.?

a. a student discount at the movie theatre

b. long-distance telephone service that costs 15 cents per minute for the first 10 minutes and 5 cents per minute after 10 minutes

c. a senior citizens’ breakfast discount at a local restaurant.

d. coupon discounts on laundry detergent

2.Evaluate the following statement regarding monopoly behaviour: “Since a monopoly firm is a price maker, it can charge whatever price it wants for whatever quantity it wants to sell.”

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Ans) 1) Price discrimination is the practice of charging different price for same product. This enables the seller to increase the revenue by charging according to the willingness to pay or the elasticity of demand.

Here, student discount is price discrimination because the willingness to pay of a student is less (or demand elasticity is more) and in order to attract them, seller offers discount. This enables the seller to increase the revenue by capturing larger market share.

It is again price discrimination because for first few minutes, the willingness to pay is more (demand is less elastic) of a consumer but after a while, the willingness to pay of a consumer decreases. And in order to earn more revenue, seller lowers the price according to the willingness to pay of a consumer.

Senior citizens have more elastic demand for breakfast at a restaurant. And therefore, to attract them, seller offers lower price.

Collection of coupons show the lower willingness to pay of a consumer. And this acts a kind of signal for the seller that this buyer has lower willingness to pay and hence seller decreases the price i.e offers discount to capture that market share.

2) Monopoly is when there is a single seller selling unique product. Monopoly faces downward sloping demand curve. However, monopoly can charge whatever price it wants but only when it restricts the quantity.

In order to sell more quantity, monopoly will have to lower the price.

Add a comment
Know the answer?
Add Answer to:
1. Explain how each of the following is a form of price discrimination.? a. a student...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Which of the following is an example of 2ad degree price discrimination? An improve group lets...

    Which of the following is an example of 2ad degree price discrimination? An improve group lets customers choose how much they pay for their tickets. A toaster manufacturer makes a super cheap, low end toaster and a more expensive super high-end toaster. A restaurant offers a "Senior Breakfast" where senior citizens get all breakfast items at a 25% discount. A carnival chargers a price per person just to get in, and then also charges separately for each ride. a, b....

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT