For a monopolist to practice effective price discrimination, one necessary condition is:
A) identical price elasticity among groups of buyers.
B) differences in the price elasticity of demand among groups of buyers.
C) that the product is homogeneous market.
D) none of these.

Question

Quizplus · Accepted Answer

Effective price discrimination requires that the monopolist has the ability to segment the market into groups with different price elasticities of demand. If all buyers have identical price elasticities of demand, then the monopolist cannot charge different prices to different groups and earn more profit from buyers who are willing to pay more for the product. Therefore, option B is the correct choice. Option A is incorrect because it assumes that all buyers have the same price elasticity of demand. Option C is incorrect because effective price discrimination can still be practiced even if the product is not homogeneous. Option D is incorrect because there is a necessary condition for effective price discrimination, which is differences in price elasticities of demand among groups of buyers.

For a Monopolist to Practice Effective Price Discrimination, One Necessary