If a firm engages in price discrimination, it may defend itself by showing that there is a cost justification for charging different customers different prices.

Question

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Price discrimination is generally legal as long as there is a legitimate cost justification for the difference in prices. The firm must be able to demonstrate that the cost of providing the product or service to different customers differs and justifies the difference in prices. This is known as the cost justification defense.

If a Firm Engages in Price Discrimination, It May Defend