Question

In 2002, seven large pharmaceutical companies announced a plan to provide low-income elderly people with a card guaranteeing them discounts of 20% or more on dozens of prescription medicines.
     1. Why did the firms institute this program?
a. Increase goodwill among elderly
b. Generate corporate tax breaks
c. To increase the consumer surplus of low-income elderly people
d. To increase their profits

2. Hertz charges $139 to rent a Toyota Camry for one day in New York City and only $61 per day in Miami. Is this price discrimination?
a. Yes
b. No

3. Using the information from the previous question: provide a couple of sentences explaining why or
why not

Answer 1

1)

Its a sort of price discrimination aimed to attract the certain group of customers. It is aimed to maximize the profits.

Correct option is

d. To increase their profits

2)

In this case, two different prices are changed at two different locations. Assuming other things the same, it is an example of price discrimination.

Correct option is

a. Yes

3)

In this case, price of service is different in two location. In this case, different price is charged as per location. Demand varies from one location to other. So, different prices are charged at different location to maximize the profit. It is a case of third degree discrimination.