Question 1

Which of the following best describes the primary goal of price discrimination for a firm with market power?

Accepted Answer

To convert as much consumer surplus as possible into additional profit for the firm.

Question 2

Delta Air Lines' use of AI-driven pricing tools is an example of which economic concept?

Accepted Answer

Personalized pricing, where prices are tailored to individual willingness to pay using consumer data.

Question 3

Which of the following is NOT a necessary condition for a firm to successfully implement price discrimination?

Accepted Answer

Consumers must be able to resell the product easily.

Question 4

Suppose Instacart uses big data to segment customers and charge different prices for the same grocery item. This practice most closely resembles:

Accepted Answer

Third-degree price discrimination.

Question 5

A cereal company sells boxes for $$4 each and sells 1,000,000 boxes per week. After introducing a 1 $$coupon, 1,500,000 boxes are sold and 750,000 coupons are redeemed. How many consumers benefit from the coupon?

Accepted Answer

$$500,000$$ consumers who buy at $$3$$ and $$250,000$$ who save $$1$$ per box, totaling $$750,000$$ consumers.

Question 6

If a firm raises the price of cereal to $$4.50$$ when offering a $$1$$ coupon, which of the following is a possible outcome?

Accepted Answer

Some original buyers may stop purchasing, while others gain surplus by using the coupon.

Question 7

Which of the following best explains why price discrimination can sometimes increase total output in a market?

Accepted Answer

It allows firms to serve consumers who would not buy at a single uniform price.

Question 8

Which ethical concern is most directly raised by the use of AI-driven personalized pricing in markets such as airlines and groceries?

Accepted Answer

The lack of transparency and possible erosion of consumer trust.

Question 9

Consider a market where price discrimination is prohibited. According to the cereal coupon example, what is a possible effect on consumer surplus?

Accepted Answer

Consumer surplus may decrease because some consumers who would benefit from lower prices cannot do so.

Question 10

Which of the following statements about the effect of price discrimination on consumers is most accurate?

Accepted Answer

The effect on consumer surplus depends on the number of prices charged and the distribution of consumer demand.

Question 11

A firm is considering implementing a price discrimination strategy. Which of the following is a necessary condition for this strategy to be profitable?

Accepted Answer

The firm must prevent resale between consumers.

Question 12

Suppose a digital platform uses randomized price tests to learn about consumer preferences. Which type of price discrimination is this most likely to evolve into as data collection improves?

Accepted Answer

First-degree (perfect) price discrimination.

Question 13

Which of the following best describes third-degree price discrimination?

Accepted Answer

Charging different prices to different groups based on observable characteristics.

Question 14

If a firm uses coupons to segment the market, which group is most likely to benefit from the coupon?

Accepted Answer

Consumers with higher price sensitivity who are willing to redeem the coupon.

Question 15

Which of the following is a potential efficiency benefit of price discrimination in digital markets?

Accepted Answer

It can reduce unused capacity by matching prices to willingness to pay.

Question 16

A firm observes that after introducing personalized pricing, its producer surplus increases but consumer trust declines. This scenario illustrates:

Accepted Answer

The tradeoff between efficiency and fairness in price discrimination.

Question 17

Which of the following is a plausible reason why consumers may view variable pricing for groceries as more troubling than for airline tickets?

Accepted Answer

Groceries are a basic necessity, so fairness concerns are heightened.

Question 18

Suppose a firm can perfectly segment the market and charge each consumer their maximum willingness to pay. What is the effect on consumer surplus?

Accepted Answer

Consumer surplus is reduced to zero.

Question 19

Which of the following best summarizes the main ethical concern with 'surveillance pricing'?

Accepted Answer

It may use personal data to set prices, raising privacy and fairness issues.

Question 20

If a firm introduces a coupon but raises the base price, what determines whether total consumer surplus increases or decreases?

Accepted Answer

The number of prices charged and the distribution of consumer demand.

Price Discrimination in Modern Markets: Digital Platforms, Consumer Surplus, and Ethical Implications

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