Third-degree price discrimination results when a firm sells
A)its product to every customer at a different price.
B)its product by volume at a different price.
C)every unit at the same price.
D)its product to different groups at different prices.

Question

Quizplus · Accepted Answer

Third-degree price discrimination occurs when a firm charges different prices to different groups of customers for the same product or service. The firm identifies different groups of customers with different elasticities of demand, and charges a higher price to the group with a lower elasticity of demand (i.e. a willingness to pay a higher price) and a lower price to the group with a higher elasticity of demand (i.e. a lower willingness to pay). This allows the firm to capture more consumer surplus and increase its profits.

Third-Degree Price Discrimination Results When a Firm Sells