A firm sells its product to two groups of buyers: daytime buyers and nighttime buyers.There are 50 daytime buyers,all of whom have identical demands given by D_D in the figure below.There are 50 nighttime buyers,all of whom have identical demands given by D_N in the figure below.The firm's variable costs are constant (SMC = AVC = $12)and its total fixed cost is $250,000.The marketing director must devise a two-part pricing plan that will maximize the firm's profit. A firm selling in two markets is practicing price discrimination A)anytime it charges different consumers different prices. B)when it is charging different consumers different prices and the price difference is not based upon cost differences. C)when it refuses to sell the good to some group of consumers. D)all of the above E)none of the above

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Quizplus · Accepted Answer

Price discrimination occurs when a firm charges different prices to different groups of buyers for an identical product. In this case, the firm is charging different prices to daytime and nighttime buyers, which is not based on cost differences since the variable cost is constant for all buyers. Therefore, the firm is engaging in price discrimination. The best choice is B.

A Firm Sells Its Product to Two Groups of Buyers