Price discrimination is often used by businesses. Explain the conditions under which price discrimination is practiced
What will be an ideal response?
Three conditions make price discrimination possible. First, the seller must be a monopolist, or possess some degree of power to control the price of the product. Second, the seller must be able to segment the buyers of the product into different groups that reflect differing willingness to pay for the product. Third, the buyers who have the opportunity to purchase at a lower price cannot resell the product to the buyers who must purchase the product at a higher price.
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Ricky is thinking about borrowing $10,000 from Fred. He promises Fred cash flows of $5000 for the next three years. If Fred's cost of capital is 10%, what is the present value of the stream of cash flows?
a. $9873.45 b. $12,434.26 c. $11,342.76 d. $8677.69
One reason stagflation is difficult to recover from is because:
A. less output requires less inputs to be hired. B. prices tend to adjust more quickly downward than upward. C. wages are sticky downward. D. input prices increase with output prices.
An increase in the budget deficit can be reflected in
A) an increase in private saving. B) a reduction in investment. C) a reduction in net exports. D) all of the above E) none of the above
We know that monopolistically competitive firms prevent the efficient use of resources because they produce where
A. P > ATC. B. MR > P. C. P > MC. D. P = MC.