ECON 300 EXAM 4 QUESTIONS AND
CORRECT ANSWERS WITH COMPLETE
SOLUTION | NEW 2026 UPDATE
What are the conditions necessary for a firm to be able to price discriminate? -
ANSWERS 1. Market power
2. Identify different groups and how their demand differs
3. Prevent or limit resale
What is 1st degree or perfect price discrimination? - ANSWERS - Practice of
charging each customer their reservation price
-Max price that a customer is willing to pay for a good
What is the effect on CS, PS, W, DWL, and output compared to single price
monopoly and perfect competition. - ANSWERS - Consumer Surplus
*Capture all available CS
- Producer surplus
*If CS is maximized, so is PS (profits)
- Welfare
*Increases so both parties are better off
, - Deadweight loss
*None
What is 3rd degree or group price discrimination? Make sure you can solve
problems using algebra, graphs, and elasticity coefficients. - ANSWERS Group
price discrimination
Senior citizen
Student discount
How does elasticity affect the size of the price markup above MC? - ANSWERS
Less elastic = higher price
More elastic = lower price
- Student discount
What is a two-part tariff or two-part pricing? What effect does it have on
consumer surplus? - ANSWERS 1. Lump sum access fee or entry fee and a
usage fee or per unit fee
2. CS = 0
How does the access or entry fee impact the amount of units the consumer will
consume? Why? - ANSWERS - If the entrance fee is high, the price per unit is
lower
- If the entrance fee is low, the price per unit will be higher
What is bundling? - ANSWERS buying products as a package
CORRECT ANSWERS WITH COMPLETE
SOLUTION | NEW 2026 UPDATE
What are the conditions necessary for a firm to be able to price discriminate? -
ANSWERS 1. Market power
2. Identify different groups and how their demand differs
3. Prevent or limit resale
What is 1st degree or perfect price discrimination? - ANSWERS - Practice of
charging each customer their reservation price
-Max price that a customer is willing to pay for a good
What is the effect on CS, PS, W, DWL, and output compared to single price
monopoly and perfect competition. - ANSWERS - Consumer Surplus
*Capture all available CS
- Producer surplus
*If CS is maximized, so is PS (profits)
- Welfare
*Increases so both parties are better off
, - Deadweight loss
*None
What is 3rd degree or group price discrimination? Make sure you can solve
problems using algebra, graphs, and elasticity coefficients. - ANSWERS Group
price discrimination
Senior citizen
Student discount
How does elasticity affect the size of the price markup above MC? - ANSWERS
Less elastic = higher price
More elastic = lower price
- Student discount
What is a two-part tariff or two-part pricing? What effect does it have on
consumer surplus? - ANSWERS 1. Lump sum access fee or entry fee and a
usage fee or per unit fee
2. CS = 0
How does the access or entry fee impact the amount of units the consumer will
consume? Why? - ANSWERS - If the entrance fee is high, the price per unit is
lower
- If the entrance fee is low, the price per unit will be higher
What is bundling? - ANSWERS buying products as a package
