Practice question · Match the pairs
Match each price discrimination type to its mechanism.
- First degree
- Second degree
- Third degree
- Natural monopoly
- Charge different prices to identifiable groups
- Charge each consumer their willingness to pay
- Economies of scale make one firm most efficient
- Offer different packages; consumers self-select
Hints
- The degrees differ by what the seller can observe.
- One requires knowing each buyer's willingness to pay individually.
Show the answer
- First degree → Charge each consumer their willingness to pay
- Second degree → Offer different packages; consumers self-select
- Third degree → Charge different prices to identifiable groups
- Natural monopoly → Economies of scale make one firm most efficient
Why
Three degrees of price discrimination, plus the structural reason a monopoly might be socially efficient.
Practise Monopoly
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