ECON 302: Lesson 8

Terms in this set (10)

An amusement park charges an entrance fee of $75 per person plus $2.50 per ride. This is an example of
a two-part tariff.
A firm is charging a different price for each unit purchased by a consumer. This is called
first-degree price discrimination.
A monopolist can perfectly price discriminate
If it knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit
Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:
is attempting to convert consumer surplus into producer surplus.
A firm setting a two-part tariff with only one customer should set the entry fee equal to
consumer surplus.
Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct?
The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
For a two-part tariff imposed on two consumers, the entry fee is based on the:
consumer surplus of the customer with lower willingness-to-pay.
When a firm charges each customer the maximum price that the customer is willing to pay, the firm
engages in first-degree price discrimination.
A pricing strategy that requires consumers pay an up-front fee plus an additional fee for each unit of product purchased is a
two-part tariff.
Under perfect price discrimination, consumer surplus
equals zero.
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