Consider the following scenario to answer the following questions: The Varsity,located in downtown Atlanta,is the world's largest drive-in restaurant.Located near the Georgia Tech campus,the drive-in attracts two distinct types of customers-college students and visitors to Atlanta.The owners are considering offering a student discount of $1 off their combo meal,which is regularly priced at $9.There are 5,000 students interested in purchasing a combo meal,with a maximum willingness to pay of $8.There are 5,000 visiting customers interested in purchasing the combo meal,with a maximum willingness to pay of $9.Assume that each customer,at most,will purchase a single meal and the marginal cost is $5.
-Which of the following examples is the closest to perfect price discrimination?
A) nontransferable goods that are sold in an auction
B) Internet-access package deals for new and old customers
C) monthly versus daily bus tickets
D) daily deals in an electronics store
E) clubs offering waived cover charges for "ladies night"

Question

Quizplus · Accepted Answer

Perfect price discrimination occurs when a seller is able to charge each customer their maximum willingness to pay. In this scenario, offering a student discount of $1 off the combo meal allows the restaurant to charge the visiting customers their maximum willingness to pay of $9, while charging the college students a price just below their maximum willingness to pay of $8. This is the closest example to perfect price discrimination, as the restaurant is able to extract the highest possible price from each customer based on their willingness to pay. The other options do not involve the same level of customization in pricing for each individual customer.

Consider the Following Scenario to Answer the Following Questions: the Varsity,located