Question

1. A “nonexample” of price discrimination might be:

	a.	Discounts for matinee movie tickets.
	b.	Higher auto insurance premiums charged to younger drivers.
	c.	Price difference between the US and the international edition of a textbook.
	d.	Different (net) tuition charged to different college students.

2. A monopolist has two specific demanders with demand equations: q_A = 10 – p and q_B = 10 – 2p. This monopolist implements an optimal two-part tariff pricing scheme, under which demanders pay a fixed fee a for the right to consume the good and a uniform price p for each unit consumed. The monopolist chooses a and p to maximize profits. This monopolist produces at constant average and marginal costs of AC = MC = 2. The monopolist’s profits are __________ and the average price paid by demander B is _________.

Answer 1

1. A “nonexample” of price discrimination might be:

Answer - Option C - Price difference between the US and the international edition of a textbook.

because price discrimination means selling any product or charging for any service at different price or rate to different people or customers. In this, the product remains same but the price for that product would be different for different customers. In option C, the textbook have two edition. so the price for each textbook can be differ. so this is not a example of price discrimination.

Option A - Discounts for matinee movie tickets - is INCORRECT because the product(Movie) is same but due to discount for matinee movie ticket the price is different.

Option B - Higher auto insurance premiums charged to younger drivers - is INCORRECT because the product(Insurance premium) is same but the price is differ due to higher price charged to younger drivers. It is the example of price discrimination.

Option D - Different (net) tuition charged to different college students. is INCORRECT because the service(tution) is same but prise is differ because different price charged to different college student