The situation in which a firm is able to charge the maximum price consumers are willing to pay for each unit of output the firm sells is referred to as:
A)first-degree price discrimination.
B)second-degree price discrimination.
C)third-degree price discrimination.
D)fourth-degree price discrimination.

Question

Quizplus · Accepted Answer

First-degree price discrimination, also known as perfect price discrimination, occurs when a firm is able to charge the exact maximum price each individual consumer is willing to pay for each unit of output. This means that the firm is able to extract all consumer surplus and capture all economic profit. However, first-degree price discrimination is difficult to implement in practice as it requires detailed information about each consumer's willingness to pay.

The Situation in Which a Firm Is Able to Charge