Sia
Question
Microeconomics
Posted 7 months ago
All of the following are necessary for a firm to price discriminate except
Choose 1 answer:
(A) the ability to identify a buyer's willingness to pay
(B) differences in the price elasticities of different consumers
(C) a monopoly
(D) the ability to control price
(E) the ability to prevent resale
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Answer from Sia
Posted 7 months ago
Solution
a
Ability to Identify Willingness to Pay: A firm must be able to identify different consumers' willingness to pay to price discriminate effectively
b
Differences in Price Elasticities: Price discrimination requires that different consumers have different price elasticities of demand
c
Monopoly: While a monopoly can price discriminate, it is not a necessary condition. Firms in competitive markets can also price discriminate if other conditions are met
d
Ability to Control Price: A firm must have some control over the price to implement price discrimination
e
Ability to Prevent Resale: To maintain different prices for different consumers, a firm must prevent resale between consumers
Answer
(C) a monopoly
Key Concept
Monopoly is not a necessary condition for price discrimination.
Explanation
While monopolies often engage in price discrimination, firms in competitive markets can also price discriminate if they can identify willingness to pay, control prices, and prevent resale.
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