For a firm to be able to engage in price discrimination, it must
A) face a downward sloping demand curve.
B) produce more than one product.
C) have customers of different levels of wealth and age.
D) have economies of scale.

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different groups of consumers for the same product. To do this successfully, the firm must have some degree of market power, which means that it faces a downward sloping demand curve. This allows the firm to increase profits by charging higher prices to customers who are willing to pay more, without losing too many sales from those who are not willing to pay as much. The other options listed are not necessarily required for price discrimination to occur.

For a Firm to Be Able to Engage in Price