A firm engages in price discrimination when it:
A) charges different prices for different units of different goods.
B) charges the same price for different units of the same good.
C) charges a higher price for units for which the willingness to pay is high than for those units for which the willingness to pay is low.
D) charges a lower price for units for which the willingness to pay is high than for those units for which the willingness to pay is low.

Question

Quizplus · Accepted Answer

Price discrimination occurs when a firm charges different prices for the same product to different customers or groups of customers. Option C states that the firm charges a higher price for units for which the willingness to pay is high than for those units for which the willingness to pay is low, which is an example of price discrimination. Option A is incorrect because charging different prices for different units of different goods is not price discrimination. Option B is incorrect because charging the same price for different units of the same good is not price discrimination. Option D is incorrect because it is the opposite of price discrimination, where the firm would charge a higher price for units for which the willingness to pay is low than for those units for which the willingness to pay is high.

A Firm Engages in Price Discrimination When It