If a firm is price differentiating, then it is
A) producing a homogenous product.
B) charging different prices to different consumers based on differences in marginal costs.
C) charging different prices based on quality.
D) charging different prices based on advertising costs.

Question

Quizplus · Accepted Answer

Price differentiation involves charging different prices to different consumers based on differences in their marginal costs. This allows the firm to capture more consumer surplus and maximize profits. The product may or may not be homogenous and the pricing may or may not be based on quality or advertising costs.

If a Firm Is Price Differentiating, Then It Is