The reason that the local telephone company is able to engage in price discrimination between business and residential customers in providing local phone service is that
A) it is the only provider of local (landline) telephone service.
B) it must be extremely difficult, if not impossible, for one consumer to resell phone service to another.
C) business and residential customers differ in their willingness to pay for phone service.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

The local telephone company is typically the only provider of local (landline) telephone service, which gives it a monopoly on this market. It is also difficult for one consumer to resell phone service to another, which further limits competition. Finally, business and residential customers often differ in their willingness and ability to pay for phone service, allowing the company to engage in price discrimination and charge higher prices to business customers. Therefore, all of the above reasons account for why the local telephone company is able to engage in price discrimination.

The Reason That the Local Telephone Company Is Able to Engage