When a firm charges each customer the maximum price that the customer is willing to pay, the firm:
A) engages in a discrete pricing strategy.
B) charges the average reservation price.
C) engages in second-degree price discrimination.
D) engages in first-degree price discrimination.

Question

Quizplus · Accepted Answer

When a firm charges each customer the maximum price that the customer is willing to pay, it is engaging in first-degree price discrimination. This strategy involves charging each customer their individual reservation price, which is the maximum price they are willing to pay. This allows the firm to capture more consumer surplus and increase profits.

When a Firm Charges Each Customer the Maximum Price That