A Firm That Uses Price Discrimination to Enhance Its Net

question 78

Multiple Choice

A firm that uses price discrimination to enhance its net revenues will

• A) expand output as long as price exceeds average total costs.
• B) expand output as long as average total costs are declining.
• C) charge a higher price to consumers with a more elastic demand for the firm's product.
• D) charge a lower price to consumers with a more elastic demand for the firm's product.

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Definitions:

Random Walk

The path of a variable whose changes are impossible to predict.

Marginal Utility

The additional satisfaction or usefulness gained from consuming one more unit of a good or service.

Risk-averse

Describes individuals or entities that prefer to avoid risk and would rather choose a certain outcome over a gamble with a potentially higher, but uncertain, return.

Diminishing Marginal Utility

An economic principle that asserts the added satisfaction a consumer gains from consuming one more unit of a good or service decreases with each additional unit consumed.