Which of the following statements is false? A. First-degree price discrimination

Question

Which of the following statements is false?

A. First-degree price discrimination works to increase a firm's profits by converting consumer surplus into revenue for the firm, while third-degree price discrimination increases a firm's profits by more accurately assessing the willingness to pay of different groups of consumers.

B. Because it focuses on more accurately assessing the willingness to pay of different groups of consumers, third-degree price discrimination will increase a firm's profits more than will first-degree price discrimination.

C. First-degree and third-degree price discrimination work to increase a firm's profits by more accurately matching willingness to pay to the marginal costs of production.

D. First-degree and third-degree price discrimination work to increase a firm's profits by converting consumer surplus into revenue for the firm.

Explanation / Answer

Option (C) is incorrect.

First-degree and third-degree price discrimination both increase profits by converting consumer surplus to revenue, and not by matching willingless to pay (That is, the reservation price of buyer) to marginal cost (That signifies, price discrimination works by equating demand (Price) with marginal cost, which is incorrect. Under price discrimination, the firm equates marginal revenue with marginal cost).

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