Question

QUESTION 1

Which of the following conditions is NOT required for successful direct price discrimination?

	A.	The seller must be able to prevent arbitrage between low-value and high-value buyers
	B.	The seller must be able to identify customers as high-value or low-value buyers
	C.	The seller must offer different products for high-value and low-value groups of consumers
	D.	The seller should charge higher prices to high-value buyers

QUESTION 2

Under a version of direct price discrimination, the seller is able to charge each customer their maximum willingness to pay for the product. This practice is known as perfect price discrimination. If a seller successfully adopts perfect price discrimination, what happens to the consumer surplus in this market?

	A.	Consumer surplus declines but remains to be positive
	B.	Consumer surplus increases
	C.	Consumer surplus becomes negative
	D.	Consumer surplus becomes zero

QUESTION 3

Which of the following statements is NOT true?

	A.	The Robinson-Patman Act was passed by Congress in response to the pricing behavior of Walmart
	B.	The Robinson-Patman Act was passed by Congress in 1936
	C.	The Robinson-Patman Act allows sellers to offer discounts in order to meet the prices offered by other sellers
	D.	The Robinson-Patman Act allows sellers to charge different prices to different customers if the costs of serving these buyers are different

QUESTION 4

Under successful direct price discrimination, the seller should charge higher prices to buyers with more inelastic demand

True

False

QUESTION 5

Direct price discrimination may not work if customers view the scheme as unfair

True

False

Answer 1

Answer 1. The seller must offer different products for high-value and low-value groups of consumers

Reason- Seller can sell similar product to differenct groups of people.

Answer 2. Consumer surplus becomes zero

Reason- When perfect discrimination takes place a seller charges the consumer their maximum willingness to pay. So consumer surplus is zero.

Answer 3. The Robinson-Patman Act was passed by Congress in response to the pricing behavior of Walmart

Reason- The act was not passed specifically against Walmart. But it has certainly affected Walmart in price discriminating and offering discounts.

Answer 4. TRUE-

Reason-The more inelastic demand is the less will the fall in the quantity due to price rise. So the monopolist can successfully price discriminate in case of more inelastic demand.

Answer 5. FALSE-

Reason- Consumers will stop buying the product which is price discriminated only when their is a cheaper alternative available. In most cases consumers are aware of the price discrimination and price discrimination is unfair. The consumers paying higher prices will be more affected than the ones who got to pay less. So everybody is not against it even though it is unfair.