Without price discrimination, a firm
A)faces a tradeoff when pricing a good that has customers with different willingness to pay.
B)cannot maximize profit.
C)has no market power.
D)does not get any producer surplus, with all of the surplus going to consumers.

Question

Quizplus · Accepted Answer

Without price discrimination, a firm faces a tradeoff when pricing a good that has customers with different willingness to pay. If the firm charges a high price to capture more profits from customers with a higher willingness to pay, it may lose sales from customers with a lower willingness to pay. If the firm charges a low price to attract more sales from customers with a lower willingness to pay, it may forgo profit from customers with a higher willingness to pay. Price discrimination allows the firm to capture more profit from each customer segment by charging a different price based on willingness to pay.

Without Price Discrimination, a Firm