1. Which of the following statements is correct for a firm that can price-discriminate?
a) It should adjust prices so that customers with price-inelastic demand pay higher prices than those with elastic
demand.
b) It should adjust prices so that customers with price-inelastic demand pay lower prices than those with elastic
demand.
c) It should adjust prices so that customers with price-elastic demand pay lower prices than those with inelastic
demand.
d) It should adjust prices so that customers with price-elastic demand pay higher prices than those with inelastic
demand.
2. Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will
charge the lower price to the group with:
a) the fewer close substitutes.
b) the lower price elasticity of demand.
c) the higher price elasticity of demand.
d) The answer cannot be determined with the information given.
3. Many hotel chains offer discounts for senior citizens. This is an example of ________ that is ________ in the United
States.
a) single-price monopoly power; legal
b) price discrimination; legal
c) market power; illegal
d) price discrimination; illegal