Suppose a firm is selling an identical product to different customers, and these

Question

Suppose a firm is selling an identical product to different customers, and these customers possess different elasticity of demand. Given these circumstances, indicate whether the ofllowing statements are true or false, by moving the true/false labels to the appropriate boxes. Compared to the case where the firm charges the same price to all customers, price discrimination can increase this firm's profits. If arbitrage is possible, then it is easier ofr the firm to maximize its profits through price discrimination. Suppose the firm has established a single price ofr its product. However, there are potential customers who are not willing to pay the existing price, but are willing to pay a price that exceeds the firm's marginal cost of production. In this case, the firm can increase its profits, by applying price discrimination to sell the product to these potential customers.

Explanation / Answer

1. Is true.

2. Is False, since more elasticity implies more change in quantity demanded for a slight change in price.

3. True. Since it is the case of price discrimination, people/third parties also makes use of it to exploit the other community.

4. False, it that case, firm would lose and the third parties other than firm and customer would benifit.

5. True

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