Suppose a Manager Is Interested in Implementing Third-Degree Price Discrimination

question 79

Multiple Choice

Suppose a manager is interested in implementing third-degree price discrimination.The manager knows that the price elasticity of demand for Group 1 is −2 and the price elasticity of demand for Group 2 is −1.2.Based on this information alone we can conclude that the price charged to Group 2 will be:

• A) the same as the price charged to Group 1.
• B) lower than the price charged to Group 1.
• C) higher than the price charged to Group 1.
• D) There is insufficient information to determine whether Group 2 will have a higher, lower, or the same price as Group 1.

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Definitions:

Bonus Product

An additional item given to consumers as an incentive for purchasing a primary product.

Personal Care Items

Products intended for personal hygiene and grooming, such as toiletries, cosmetics, and skincare products.

Independent Variable

A variable that is manipulated or changed in an experiment to test its effects on the dependent variable.

Dependent Variable

In an experiment, the variable that is being tested and measured, expected to change as a result of manipulations to the independent variable.