Figure 11.1.1
-Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:
A) is trying to reduce its costs and therefore increase its profit.
B) is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act.
C) is attempting to convert producer surplus into consumer surplus.
D) is attempting to convert consumer surplus into producer surplus.
E) Both A and C are correct.

Question

Figure 11.1.1
-Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:
A) is trying to reduce its costs and therefore increase its profit. 
B) is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act. 
C) is attempting to convert producer surplus into consumer surplus. 
D) is attempting to convert consumer surplus into producer surplus. 
E) Both A and C are correct.

Quizplus · Accepted Answer

By charging a higher price to men and a lower price to women, the firm is attempting to convert consumer surplus into producer surplus. This means that the firm is trying to capture more of the value that customers place on its product, thereby increasing its profits. This practice is not necessarily illegal, as long as it does not violate anti-discrimination laws.

Figure 11.1.1 -Rather Than Charging a Single Price to All Customers, a Customers