Which of the following cases best represents third-degree price discrimination?

• A. A firm charges a single price to all customers regardless of their characteristics.
• B. A movie theater charges different ticket prices to adults, children, and seniors.
• C. A seller negotiates a unique price with each individual customer based on their willingness to pay.
• D. A company offers quantity discounts to buyers who purchase in bulk.

Answer: (B)

Verified step by step guidance

1. Understand the concept of third-degree price discrimination: it occurs when a firm charges different prices to different groups of consumers based on identifiable characteristics (such as age, location, or customer type), where each group faces a single price.
2. Review each option and identify whether the pricing strategy involves segmenting customers into distinct groups and charging each group a different price.
3. Option 1: A firm charges a single price to all customers regardless of their characteristics. This is uniform pricing, not price discrimination.
4. Option 2: A movie theater charges different ticket prices to adults, children, and seniors. This matches third-degree price discrimination because the firm segments customers by age groups and charges each group a different price.
5. Option 3 and 4 involve personalized pricing or quantity discounts, which correspond to first-degree or second-degree price discrimination, not third-degree.