Question

A firm will realize the highest level of profit if it is able to engage in...

A firm will realize the highest level of profit if it is able to engage in

a)first-degree price discrimination.

b)second-degree price discrimination.

c)third-degree price discrimination.

d)The answer cannot be determined without additional information.

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Answer #2


With respect to price discrimination, a firm can earn the highest level of profit when it can capture the entire consumer surplus.

A firm would be able to capture the entire consumer surplus when it is able to sell the good to each individual at a price which is equal to the said individual's maximum willingness to pay.

This happens when firm engages in first degree price discrimination.

So,

A firm will realize the highest level of profit if it is able to engage in first degree price discrimination.

Hence, the correct answer is the option (a).

answered by: anonymous
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