The Strategy Underlying Price Discrimination Is

question 33

Multiple Choice

The strategy underlying price discrimination is

• A) to charge higher prices to customers who have good substitutes available to them and lower prices to customers without many substitutes available to them..
• B) to charge everyone the same price but limit the quantity they are allowed to buy.
• C) to increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand.
• D) to reduce per-unit cost by charging higher prices to those with the most inelastic demand and lower prices to those with the most elastic demand.

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Definitions:

Shutdown Point

The level of output and price at which a firm's total revenue is equal to its total variable costs, below which the firm would lose more money by continuing to operate than by shutting down.

Break-Even Point

The level of production or the volume of sales at which total costs equal total revenue, resulting in no net loss or gain.

Lowest Price

The smallest amount for which a product or service is sold in the market.

Long Run

An interval where all inputs and expenses are adjustable, enabling total adaptation to shifts.