Suppose a Producer Is Able to Recognize Two Different Groups

question 10

Multiple Choice

Suppose a producer is able to recognize two different groups of customers, one having an elastic demand and the other having an inelastic demand. Price discrimination by the producer would most likely

• A) involve decreasing the price for only the group with inelastic demand.
• B) involve decreasing the price for only the group with elastic demand.
• C) not occur because it is illegal.
• D) involve increasing the price for both groups.
• E) involve increasing the price only for the group with elastic demand.

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Definitions:

Lump-Sum Tax

A tax that is a fixed amount, not dependent on the taxpayer's income or activity level.

Advantages

Benefits or strengths that give an entity a favorable or superior position relative to competitors or alternatives.

Disadvantages

The negative aspects or conditions that can lead to unfavorable outcomes or reduce effectiveness in a given context.

Efficient Tax

A tax imposed in such a way that it creates the least possible distortion or inefficiency in the market or economy.