Question from Past Microeconomics Qualifying Exam[]

Spring 2001 - Section I, Question Seven, George Mason University

State first whether the following statements are true, false, or uncertain. Then briefly explain your reasoning in four or five sentences. You may use a graph if it helps clarify your answer.

Price Discrimination tends to be more common in the sale of services (e.g., medical and transportation services) than in the sale of manufactured goods.


True, Since Services cannot be resold (or at least not with great ease) they are more likely to be price differently for different customers. A doctor can do surgery on a rich person for a great expense, and then do surgery pro bono for another patient. This second chap could not go and sell the surgery to another rich person. Even though the services are the same, they have different markets and with price discrimination, different prices.

For manufactured goods the opposite is true -- for the same reasons. The good can be sold immediately from one market to the other, if both markets were to persist, only the lowest priced one would move the goods.

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