First-degree price discrimination:
A) occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased.
B) results in the firm extracting all surplus from consumers.
C) occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers.
D) None of the answers are correct.

Question

Quizplus · Accepted Answer

First-degree price discrimination occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased. In this case, the firm is able to extract all surplus from consumers, as they are willing to pay the highest price possible for each unit of the good. Therefore, both options A and B are partially correct but only option C captures both aspects of first-degree price discrimination.

First-Degree Price Discrimination