Suppose a Restaurant Is Trying to Determine How Much to Charge

question 7

Essay

Suppose a restaurant is trying to determine how much to charge for a bowl of chili, 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 chili 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:

Statistical Process Control

A method of monitoring and controlling a process through the use of statistical analysis to detect and prevent unacceptable variations.

Short-Term Success

Achievements or positive outcomes that are realized within a relatively brief period, often acting as milestones towards long-term objectives.

Six Sigma

A set of techniques and tools for process improvement aiming at reducing defects and improving quality in manufacturing and business processes.

Define Measure Analyze Improve Control

A data-driven quality strategy for improving processes, part of Six Sigma methodology, focusing on defining the problem, measuring key aspects, analyzing data, improving by implementing solutions, and controlling future process performance.