Identify the truthfulness of the following statements. I. If a seller engages in second-degree price discrimination, the seller captures more producer surplus than with uniform pricing.
II) The seller captures the maximum producer surplus by engaging in block pricing.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.

Question

Quizplus · Accepted Answer

I) This statement is true. Second-degree price discrimination involves charging different prices to different groups of consumers based on their willingness to pay. By doing so, the seller is able to capture more consumer surplus and convert it into producer surplus. With uniform pricing, the seller may not capture as much surplus from each consumer.

II) This statement is false. Block pricing involves charging different prices for different tiers of quantity purchased. The goal of block pricing is to entice consumers to purchase more by offering a lower price for larger quantities. While it can increase producer surplus, it does not necessarily capture the maximum amount of producer surplus. Other pricing strategies, such as peak-load pricing or metered pricing, can also be effective in capturing producer surplus depending on the market conditions.

Identify the Truthfulness of the Following Statements