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Question
The federal government often gives out tax credits for individuals who purchase fuel-efficient or electric vehicles. A car dealership, which attempts perfect price discrimination, would respond to this knowledge by
a. targeting the same price since the individual must like the car, with or without the tax credit.
b. targeting a lower price. The buyer needed an incentive in order to purchase the vehicle, so it can be assumed that the individual is more demand-elastic.
c. targeting a higher price. The tax credit increases the buyers maximum willingness to pay.
d. targeting the same price because theres no way for the dealership to know who has the tax credit and who doesnt.
e. increasing the sticker price on all of its vehicles by the amount of the tax credit.
Answer
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