The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D 1 : Demand curve of group 1
D 2 : Demand curve of group 2
MR 1 : Marginal revenue of group 1
MR 2 : Marginal revenue of group 2
MC: Marginal cost
-Perfect price discrimination occurs when:
A)each customer is charged the maximum price that each is willing and able to pay.
B)two classes of customers are charged different prices as they have the same elasticities of demand.
C)senior citizens are offered restaurant discounts.
D)the firm sets MR

Question

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
  D 1 : Demand curve of group 1
D 2 : Demand curve of group 2
MR 1 : Marginal revenue of group 1
MR 2 : Marginal revenue of group 2
MC: Marginal cost
-Perfect price discrimination occurs when:
A)each customer is charged the maximum price that each is willing and able to pay. 
B)two classes of customers are charged different prices as they have the same elasticities of demand. 
C)senior citizens are offered restaurant discounts. 
D)the firm sets MR < MC for each class of customers. 
E)the firm charges same price to different customers so that it is equal to the equilibrium price.

Quizplus · Accepted Answer

Perfect price discrimination occurs when each customer is charged the maximum price that they are willing and able to pay. This means that the seller is able to extract all of the consumer surplus for themselves. In this case, the diagram shows that the two classes of buyers have different demand curves, indicating that they have different willingness to pay. Therefore, the perfect price discrimination would allow the seller to charge different prices to each group, based on their willingness to pay.

The Figure Given Below Shows the Demand Curves of Two