If a Firm Is Practicing Third- Degree Price Discrimination and Is

question 5

Multiple Choice

If a firm is practicing third- degree price discrimination and is charging a price of $15 per unit to consumers in Group A and a price of $10 to consumers in Group B, which of the following is true?

• A)Group B consumers have a lower price elasticity than Group A consumers.
• B)Group B consumers are less responsive to price changes than Group A consumers.
• C)Group B consumers have a greater price elasticity than Group A consumers.
• D)Group A consumers have a greater price elasticity than Group B consumers.

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Definitions:

Factory Overhead Budget

An estimation of the total costs required to support the manufacturing operations, excluding direct materials and direct labor.

Production Cost Pool

is a collection of direct and indirect manufacturing costs that are assigned to products based on specific allocation criteria.

Activity Rate

A measure used in activity-based costing to allocate overhead costs to products or services, based on specific activities or cost drivers.

Machine Hour

A measure of production time, used as a basis for allocating manufacturing overhead costs to products based on machine usage.