Agri-Tech supplies a patented sweetener to various food processors. It has noticed that the value of the sweetener varies dramatically from one buyer to another, depending on the end-use demand. But its experiments with charging higher prices to some buyers have failed because:
A) price discrimination is always illegal.
B) of market arbitrage.
C) the cost of production is always the same.
D) outsourcing is compromised by contracting costs.

Question

Quizplus · Accepted Answer

Market arbitrage refers to the practice of buying a good at a lower price from one market and selling it in another market where the price is higher. Agri-Tech's attempts to charge higher prices to some buyers would likely result in those buyers simply purchasing the sweetener from a cheaper source, thus limiting Agri-Tech's ability to price discriminate. This is an example of market arbitrage.

Agri-Tech Supplies a Patented Sweetener to Various Food Processors