1. Price discrimination leads to a price for consumers with a

ID: 1202379 • Letter: 1

Question

1. Price discrimination leads to a ________ price for consumers with a ________ demand.

a)    lower; more elastic

b)    lower; less elastic

c)    higher; perfectly elastic

d)    higher; more elastic

2. A price-discriminating firm will adjust prices so that customers with more ________ demand pay ________ prices than

(as) those customers with ________ elastic demand.

a)    elastic; the same; more

b)    inelastic; lower; less

c)    elastic; higher; less

d)    elastic; lower; less

3. In order to maximize profits, an airline will offer ________ prices to customers with ________ demand.

a)    higher; inelastic

b)    the lowest; the least

c)    higher; elastic

d)    lower; inelastic

Explanation / Answer

1.(a) lower,more elastic

2.(d) elastic, lower, less

3.(a) higher, inelastic.

Note: Price discrimination involves charging a different price to a different groups of people for the same good.To maximize profits a firm sets output and pricesp where MR = MC.Therefore for a group like adults,PED is inelastic- the price will be higher and for groups like students price will be lower because there demand is elastic.

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1. Price discrimination occurs when a.the supply of the product is elastic b.a p

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1. Price discrimination leads to a ________ price for consumers with a ________

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Explanation / Answer

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1. Price discrimination leads to a price for consumers with a