Question

Suppose that your school pays one rate for the first one million kilowatts of electricity and a lower rate for any power it uses over one million kilowatts. what economic concept is occurring here? a. perfect price discrimination b. second-degree price discrimination c. third-degree price discrimination d. economies of scale

Answer 1

Answer:

The correct answer is letter "B": second-degree price discrimination.

Explanation:

Price discrimination occurs when a company charges different customers different prices for the same goods or services. The different price charges to a different group must be justified by the amount of effort required. There are three degrees of price discrimination. In the second-degree discounts are given for products or services acquired in huge amounts.

Answer 2

Answer: b. second degree price discrimination

Since the school pays a different rate for the first million kilowatts consumed and a lower rate for any consumption over a million kilowatts, second degree price discrimination is at play.

When corporations or businesses sell the same product to different customers at different prices, with a view to maximize profits, price discrimination is said to occur.

There are three types of price discrimination -

First Degree price discrimination

Second Degree price discrimination

Third Degree price discrimination

First degree price discrimination occurs when the supplier sells the goods at a price the customer is willing to pay for the good.

Second Degree price discrimination occurs when the supplier establishes slabs for different quantities of goods sold. In this case, the supplier will offer a higher per unit cost for lower quantity of goods, and a lower per unit cost for a higher quantity of goods

Third degree price discrimination occurs when a firm is able to clearly divide its markets into segments. The products are positioned in each segment in a different manner.