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A monopolist separates the market into individual consumers and charges each the maximum price he is willing to pay, capturing the entire consumer surplus. This is:
AThird degree price discrimination
BSecond degree price discrimination
CFirst degree price discrimination
DNon-price competition
Answer & Solution
Correct answer: C. First degree price discrimination
1. First degree discrimination treats each consumer as a separate market.
2. Each buyer is charged the most he is willing and able to pay.
3. This extracts the entire consumer surplus from every buyer.
4. Examples include doctors' fees, auctions, and bid-and-offer pricing.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit III "Price-Output Determination under Different Market Forms", p.16_
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