FIN 701-MBA 701 EXAM 6 FASSL FANTA
LSUS
price discrimination - Answer the business practice of selling the same good at different prices
to different customers
1st degree price discrimination - Answer seller charges each buyer their maximum willingness
to pay
2nd degree price discrimination - Answer Charging different prices based on the quantity
purchased (bulk - lower price)
3rd degree price discrimination - Answer charge different prices to different customer
segments
students, senior, kids, etc
relationship between perfect price discrimination and consumer surplus - Answer consumer
surplus -- the amount between what the consumer is willing to pay and what is being charged --
is zero in perfect (1st degree) price discrimination because each customer is paying @ their max
willingness
block pricing - Answer practice of charging different prices for different quantities or "blocks"
of a good (2nd degree)
commodity bundling - Answer the practice of bundling several different products together and
selling them at a single "bundle price"
Bundling as a pricing strategy - Answer Consumers won't buy both separate, but may buy
them together at a reduced cost -- this cost cannot go over the maximum total willing to pay by
all groups
two-part pricing - Answer a price tactic that charges two separate amounts to consume a
single good or service -- upfront fee for the right to purchase the good at unit price(perfect/1st
degree)
price skimming - Answer a pricing policy whereby a firm charges a high introductory price and
slowly lowers -- usually because they are early entrants
LSUS
price discrimination - Answer the business practice of selling the same good at different prices
to different customers
1st degree price discrimination - Answer seller charges each buyer their maximum willingness
to pay
2nd degree price discrimination - Answer Charging different prices based on the quantity
purchased (bulk - lower price)
3rd degree price discrimination - Answer charge different prices to different customer
segments
students, senior, kids, etc
relationship between perfect price discrimination and consumer surplus - Answer consumer
surplus -- the amount between what the consumer is willing to pay and what is being charged --
is zero in perfect (1st degree) price discrimination because each customer is paying @ their max
willingness
block pricing - Answer practice of charging different prices for different quantities or "blocks"
of a good (2nd degree)
commodity bundling - Answer the practice of bundling several different products together and
selling them at a single "bundle price"
Bundling as a pricing strategy - Answer Consumers won't buy both separate, but may buy
them together at a reduced cost -- this cost cannot go over the maximum total willing to pay by
all groups
two-part pricing - Answer a price tactic that charges two separate amounts to consume a
single good or service -- upfront fee for the right to purchase the good at unit price(perfect/1st
degree)
price skimming - Answer a pricing policy whereby a firm charges a high introductory price and
slowly lowers -- usually because they are early entrants
