Question 21M.3.HL.TZ0.h.ii
| Date | May 2021 | Marks available | [Maximum mark: 4] | Reference code | 21M.3.HL.TZ0.h.ii |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Explain | Question number | h.ii | Adapted from | N/A |
One firm in the widget industry uses the practice of price discrimination, charging a lower price to one group of consumers than to another group, even though there is no difference in the cost of supplying to each group.
Using a diagram (or diagrams), explain why a profit maximizing firm might charge a higher price in one market than in another.
[4]
NB Alternative presentations may include: back to back (mirror) or an additional third diagram indicating the sum of the revenue curves.
Higher-achieving candidates were able to draw an appropriate diagram and show that profit maximization in each market would result in a higher price in the market where demand was less elastic and a lower price in the market where demand was more elastic. However, it was evident that many candidates did not understand this concept. It was common for candidates to draw two diagrams, one a perfectly competitive market and the other a monopoly market, to try and explain price discrimination. Others drew two market diagrams with different equilibrium prices.
