A firm practices price discrimination by selling at a high price in its larger market, Market A, and a lower price in its smaller market, Market B. If this firm is forced to sell at a single-price in both markets and opts for the original price in Market A, the new single-pricing strategy makes:
A) consumers in both Market A and Market B worse off.
B) consumers in Market A no worse off, but consumers in Market B worse off.
C) consumers in Market B no worse off, but consumers in Market A worse off.
D) consumers in both markets better off, as single pricing is always better for consumers than price discrimination.

Question

Quizplus · Accepted Answer

If the firm is forced to sell at a single price in both markets and chooses the original price in Market A, it will result in consumers in Market B being worse off as they will have to pay a higher price than before. Consumers in Market A will not be worse off as they will continue to pay the same high price as before. However, it is not possible to conclude that consumers in both markets will be better off with single pricing, as this depends on the magnitude of the price changes and the elasticity of demand in each market.

A Firm Practices Price Discrimination by Selling at a High