In second-degree price discrimination:Group of answer choicesthe monopolist knows the type (their willingness to pay WTP) of each and every consumerthe monopolist extracts all of the surplus from each type of consumerthe monopolist knows the WTP for each type of consumer, but cannot identify which type of consumer any individual is (before the purchase the product)the monopolist uses the bundles of price/quantity or price/quality to induce consumers to reveal their type (WTP) by their purchase decision.c and d. PreviousNext

A monopolist engaging in third-degree price discriminationGroup of answer choiceshas lower profit than a monopolist engaging in first-degree price discriminationcreates a deadweight losscan identify with group of consumers any particular individual consumer belongs tocan prevent arbitrage between different groups (or types) of consumers but not within groups of consumers.All of the above

If consumers are identical, thenGroup of answer choicesprice discrimination is impossible.price discrimination can occur if each consumer has a downward-sloping demand curve for the product.perfect price discrimination is the only form of price discrimination that can increase a monopoly's profit.bundling can increase a monopoly's profit.

Price discrimination is a common pricing strategy used by a monopolist having discretionary pricing power. Explain Types of Price discrimination.

This exercise is about pricing strategies and price discrimination. Choose all the correct answers.Question 1Answera.Selling bread for $4, butter for $4 and bread and butter combined for $7 is an example of second degree price discrimination.b.A monopolist applying third degree price discrimination can improve consumer welfare compared to the scenario in which they set one market-level price.c.First degree price discrimination is efficient, but rarely possible in real world.d.A monopolist knows valuations of consumers, and sets prices individually for each of the consumer at the level of their valuation. This is an example of first-order price discrimination.

Explain one way in which consumers could benefit from price discrimination.