In order to practice price discrimination a firm must
A) avoid detection by the government.
B) be able to divide consumers into groups with different demands for their product.
C) have a homogeneous product.
D) advertise their product.

Question

Quizplus · Accepted Answer

In order to practice price discrimination, a firm must be able to identify different groups of consumers with different willingness to pay for the same product. This allows the firm to charge higher prices to those with a higher willingness to pay, and lower prices to those with a lower willingness to pay, thus increasing overall profits. The other choices (A, C, D) are not necessarily required for price discrimination.

In Order to Practice Price Discrimination a Firm Must