Which of the following statements is true?
A) Firms that can identify two types of consumers can price discriminate perfectly.
B) Firms can price discriminate only if there is zero competition in the market.
C) Firms that price discriminate will not reach higher profits.
D) Firms that can prevent reselling may be able to engage in price discrimination.
E) Firms can usually price discriminate if they are in a perfectly competitive market.

Question

Quizplus · Accepted Answer

If firms can prevent reselling, they may be able to engage in price discrimination. This is because if different groups of consumers cannot resell the products or services to each other, the firm can charge different prices to each group without fear of arbitrage. The other options are incorrect. A firm can sometimes price discriminate even if there is competition in the market, and it is not necessary to identify two types of consumers to price discriminate effectively. Firms that engage in price discrimination often achieve higher profits than those that do not. Finally, firms in perfectly competitive markets cannot usually price discriminate because they are price takers and cannot charge more to some customers without losing others.

Which of the Following Statements Is True