Suppose a firm can practice perfect, first-degree price discrimination.?

Question

a. Will all consumers pay the same price for the good? Explain.

b. What is the lowest price the firm would be willing to sell a unit of output for?

c. How much output will the firm produce? Explain or draw a graph.

Answer 1

as it is perfect price discrimination then it means that every one will be paying the maximum price he or she is willing to pay. and hence it will be different for different consumers

b. the firm will sell along the demand curve till it cuts the supply ie the point where the price touches the marginal cost of the firm. so lowest price = MC

c. the firm will produce the quantity where MC=AR

Answer 2

If you have to ask "a" it is clear you don't understand what "price discrimination" means. Wikipedia is your friend. Take a look at:

http://en.wikipedia.org/wiki/Price_discr...