Chapter 11 Multiple Choice (Micro Exam 4)

When a firm engages in Perfect Price Discrimination

- Consumer surplus is zero - They produce the same output level as a competitive firm - There is no DWL

2nd degree price discrimination

- Firms sell off excess capacity more cheaply - Fixed Fee and Per Unit Fee (CC Membership) - Non linear pricing

What is an example of Second-Degree Price Discrimination

- Non linear pricing - Firms sell off excess capacity more cheaply - Ben's Phone Shop offers a cell-phone package where users pay $25/month plus $0.05/minute for all calls they place

3rd degree price discrimination

- market segmentation - Some groups pay more, others pay less - Coupons, student/senior discount, weekend/weekday air travel, Black Friday shopping, Out-of-State/In-State tuition

A common feature among Perfect Competition and Perfect Price Discrimination is the elimination of

DWL

1st degree price discrimination

Every customer is charged max willingness to pay No CS

When restaurants offer early bird dinner specials at discounted prices, this is an example of 1st Degree Price Discrimination

False

When we say that firms must be Price Takers in order to practice Price Discrimination, it means that this activity cannot occur with

Perfectly Competitive Firms

A monopolist practicing Perfect Price Discrimination produces less output and charges higher prices than a Perfectly Competitive Industry

True

In a Price Discrimination setting, people with more inelastic demand pay _____ people with more ______ demand

higher prices than; elastic