Suppose a Restaurant Is Trying to Determine How Much to Charge

question 59

Essay

Suppose a restaurant is trying to determine how much to charge for a bowl of chilli, and decides to run an experiment to see how much its customers are willing to pay by allowing them to set their own price for this menu item.
a.Is charging a customer the price he or she is willing to pay for the bowl of chilli an example of price discrimination? Briefly explain.
b.What is it called when a firm knows every consumer's willingness to pay, and can charge every consumer a different price? What happens to consumer surplus in this situation?
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Definitions:

Pork-Barrel Politics

involves government spending for localized projects secured primarily to bring money to a representative's district, often criticized as wasteful or aimed at gaining political favor.

Comprehensive Legislation

refers to wide-ranging laws or legal provisions that address multiple aspects of a particular issue or regulatory area.

Regulatory Capture

A situation where regulatory agencies are dominated by the industries they are charged with regulating, often leading to policies that benefit the industry over the public.

Regulatory Agencies

Government bodies responsible for supervising the application of laws and regulations within specific industries to ensure fairness, safety, and compliance.