When a firm charges more per ounce for a small bottle of ketchup than for a larger one,it is engaging in:
A) price discrimination based on observable customer characteristics.
B) perfect price discrimination.
C) quantity-dependent pricing.
D) two-part tariff pricing.

Question

Quizplus · Accepted Answer

This is an example of quantity-dependent pricing, where the price per unit decreases as the quantity purchased increases. In this scenario, the price per ounce for the small bottle of ketchup is higher than the price per ounce for the larger one, encouraging consumers to purchase the larger size. This pricing strategy aims to increase the overall revenue by offering a discount to bulk buyers, while still charging a higher price per unit to smaller buyers. Option A is incorrect as it mentions observable customer characteristics and there is no such distinction made in the scenario. Option B is incorrect as it refers to perfect price discrimination, which involves charging each customer the maximum amount they are willing to pay, which is not the case here. Option D is incorrect as it refers to a pricing strategy where a fixed fee is charged in addition to a price per unit, which is not applicable in this scenario.

When a Firm Charges More Per Ounce for a Small