Classify the statements as either true or false True False Answer Bank Perfect price discrimination occurs when perfectly competitive firms charge some people higher prices than others Airlines are often able to price discriminate. All else being equal, single price monopolists earn lower profits than firms that can price discriminate. Firms do not have an incentive to price discriminate because it results in some groups paying a lower price than others Price discrimination only occurs with natural monopolies Price discrimination is illegal under all circumstances

Perfect price discrimination occurs when perfectly competitive firms charge some people higher prices than others - false

Airlines are often able to price discriminate. - true

All else being equal, single price monopolists earn lower profits than firms that can price discriminate. - true

Firms do not have an incentive to price discriminate because it results in some groups paying a lower price than others- false

Price discrimination only occurs with natural monopolies - false

Price discrimination is illegal under all circumstances - false

Explanation:

Price discrimination is when a seller charges different prices to customers based on their willingness to pay.

There are three types of price discrimination:

1. First degree price discrimination: this is where the seller charges the maximum price for each unit consumed.

2. Second degree price discrimination: this is when the seller grants discount for bulk purchases.

3. Third degree price discrimination: this is when a seller charges different prices to different groups of consumers.

Price discrimination is usually practiced by monopoly firms.

Perfect competitive firms don't practice price discrimination because there are many sellers of identical goods.

Airlines usually practice price discrimination. For example, consumers that buy plane tickets very early usually pay less than consumers who buy their tickets at the last minute. This is because the willingness to pay of the consumers who buy their tickets at the last minute would be higher than those of consumers who buy their tickets a long time ago.

Prcie discrimination is not illegal. It can act as an incentive to purchase.

Firms that price discriminate earn a higher revenue than firms that don't.

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