To practice effective price discrimination, a firm must:
A) have some degree of monopoly power.
B) avoid detection by government regulatory agencies.
C) enable the resale of goods between groups of buyers.
D) calculate the utility level of each buyer in the market.

Question

Quizplus · Accepted Answer

Effective price discrimination requires some degree of monopoly power, which means the firm has the ability to control prices and limit competition. Without this power, the firm cannot charge different prices to different groups of buyers. Option B is incorrect because avoiding detection by government regulatory agencies is not necessary for effective price discrimination, though it may be desirable. Option C is inaccurate because enabling the resale of goods between groups of buyers would eliminate the price discrimination strategy. Option D is incorrect because calculating the utility level of each buyer is only a step in the process of effective price discrimination, but not a requirement.

To Practice Effective Price Discrimination, a Firm Must