Question

a. First-degree price discrimination involves a firm charging different prices: based on the firm's ability to segment the market into two or more groups to each customer based on race, religion, or other individual characteristic based on the quantity of a good or service purchased. to each customer based on his or her willingness and ability to pay. b. Which of the following purchases is an example of first-degree price discrimination? A big-box store offering a discount for people who order products in bulk A park refusing to allow entrance to those with pets. A hotel offering a promotion where customers submit the price they are willing to pay for a one-night stay A fast-food restaurant offering a student 10% off for showing her student ID

Answer 1

a. Answer:- option 4:- to each customer based on his or her willingness and ability to pay.

Reason:- Monopoly type of market sellers fixed the absolute level of price accordingly with the consumers wish to pay for the products at any level of price rate. Such price rate is actually restricts the consumer surplus which are fixed as the low price in their mind set up of expected price. But some very rare produced products which has prestigious value and the very essential intrinsic value has very high price. Such high price are fixed by the monopolistic firms was highly influenced by the customers purchasing ability and their wish to pay for them at any cost and situation.

b. Answer:- option 1:- A big-box store offering a discount for people who order products in bulk.

Reason:- The people with more purchasing power to buy are mainly targeted as the purchasing group. Such situation of sale was mainly captured by the monopolistic firms who runs the business who also well justifies the original pulse of the customers who are ready to buy the products at any price level. But the firms has need to attract the customers for the long-period. When the customers are willing to buy such products in the short-run period, it will fetch only the windfall of profits for time-being situation, but when the big-box store offers a discount usually to the customers who orders products in bulk, may make some provision to discount at the same price when they try to buy at the regular period of time without changing their buying destination shop. So the above facts gives us the example for the first-degree discrimination.