If a firm practices third-degree price discrimination, it a.charges a higher price in a market segment that is relatively more price elastic. b.charges a higher price in a market segment that is relatively less price elastic. c.charges a higher price in a market segment that has more customers.d.charges a higher price in a market segment that has fewer customers .

What is a common approach in third-degree price discrimination?  A. Loyalty programs  B. Auctions  C. Everyday low pricing  D. Seasonal promotions

What is the aim of second-degree price discrimination?  A. To charge higher prices to wealthier customers  B. To charge different prices based on customer loyalty  C. To set prices according to production costs  D. To maximize revenue from different customer segments

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.

Third-degree price discrimination often comes up in the context of discountsfor certain groups to some form of entertainment (e.g., a play, movie or a sporting event).Consider an event for which there are two audiences (e.g., students and non-students)and assume that the seller’s additional expenses (i.e., marginal cost) associated withhaving an additional seat occupied are essentially zero but the capacity of the venue islimited to K.(a) To make everything a bit more concrete, let the students’ and non-students’ inversedemands beP1 (x1) = 40 − x1 and P2 (x2) = 100 − x2.Solve for the single monopoly outcome (that is, no discrimination) without a capacityconstraint (i.e., K is a very large number).(b) Suppose now that the monopolist engages in third-degree price discrimination. Findthe optimal quantity sold to both groups of consumers, the price and the monopolist’sprofit. How does this compare to the answer you found in part (a) ?In the next two questions assume K = 50.(c) Suppose the monopolist does not engage in price discrimination. Find the profitmaximizing quantities, the price and the monopolist’s profit.(d) Suppose now that the monopolist engages in third-degree price discrimination. Findthe optimal quantity sold to both groups of consumers, the price and the monopolist’sprofit. How does this compare to the answer you found in part (c) ?2

A third-degree price-discriminating pure monopoly will follow a system whereMultiple Choicebuyers with relatively more inelastic demands are charged higher prices than buyers with relatively more elastic demands.all buyers are charged the same price regardless of their elasticity of demand.the price of the product is held the same even if the demand changes.buyers with relatively more inelastic demands are charged lower prices than buyers with relatively more elastic demands.