A firm's profits will be greatest when it practices:
A)first-degree price discrimination.
B)second-degree price discrimination.
C)third-degree price discrimination.
D)no price discrimination.

Question

Quizplus · Accepted Answer

First-degree price discrimination refers to the practice of charging each individual customer the maximum price they are willing and able to pay. This method allows the firm to capture all of the consumer surplus and maximize profits. However, this type of discrimination is difficult to implement in practice as firms must have perfect information about each customer's willingness to pay. Nonetheless, it would result in the highest level of profit for the firm.

A Firm's Profits Will Be Greatest When It Practices