Which of the following is necessary for price discrimination to occur?
A) The firm must be able to produce the good at a low cost.
B) The firm needs to decrease profits.
C) The market allows for reselling goods.
D) Consumers' preferences are hidden from the firm.
E) The firm is able to distinguish among groups of buyers easily.

Question

Quizplus · Accepted Answer

Price discrimination occurs when a firm is able to distinguish among groups of buyers easily, such as by demographics, location, or willingness to pay. This allows the firm to charge higher prices to those with a greater ability or willingness to pay, and lower prices to those with a lower ability or willingness to pay. The other options are not necessary for price discrimination to occur. The firm's production costs, profitability, and market reselling options may affect the feasibility of price discrimination, but they are not the defining features of it. Knowledge of consumer preferences may help the firm tailor its products or prices, but it is not necessary for price discrimination to occur.

Which of the Following Is Necessary for Price Discrimination to Occur