Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Charging a lower price for students to fill seats on a flight, while regular passengers pay the full fare.
B
Offering a flat rate for all consumers regardless of their income levels.
C
Increasing prices uniformly across all customer segments to match inflation.
D
Providing discounts only to frequent flyers, ignoring one-time travelers.
Understanding the Answer
Let's break down why this is correct
Answer
Price discrimination is when a firm charges different prices to different customers for the same product. This strategy helps the firm maximize profit by capturing more consumer surplus, which is the difference between what customers are willing to pay and what they actually pay. For example, a movie theater might charge lower prices for children and seniors while charging adults full price. By doing this, the theater attracts more customers from different groups, ensuring that it sells more tickets overall. This way, the firm can increase its total revenue and profit by catering to the varying willingness to pay among its customers.
Detailed Explanation
The firm charges different prices to different groups. Other options are incorrect because This option treats everyone the same; Raising prices for everyone doesn't target specific groups.
Key Concepts
Price Discrimination
Consumer Surplus
Market Power
Topic
Understanding Price Discrimination
Difficulty
hard level question
Cognitive Level
understand
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