Question

Which of the following is an example of price discrimination?

a)It costs more to make a long-distance phone call during the day than it does late at night.

b)A ticket to the zoo costs less for a child than it does for an adult.

c)Regular gasoline costs less than premium gasoline.

d)All of the above are examples of price discrimination.

Answer 1

Answer: (d) All of the above are examples of price discrimination.

price discrimination: A monopolist may charge different prices from different persons in the same market depending on their paying capacity or may charge one price in one geographical area and another price in another geographical area.

Following are the types of price discrimination:

1. Personal price discrimination: when a monopolist charges different prices from different customers on the basis of their availability to pay for the same product then it is called personal price discrimination. for eg, a ticket to the zoo costs less for a child than it does for an adult.
2. Geographical price discrimination: when a monopolist charges different prices in different areas for the same product it is called geographical price discrimination. For eg, an exporter may charge a different price in the foreign market than in the domestic market.
3. Price discrimination as peruse: when a monopolist charges different prices for different uses of a product it is called price discrimination on trade discrimination as peruse. for eg, option in India electricity tariff is often lower for domestic use than commercial use.
4. Price discrimination according to time: many public monopolists sell the same product at different prices at different times for eg, the telephone department charges high rate for late-night usage compared with daytime usage.