For the practice of price discrimination to be successful,the monopoly must
A)face an imperfect resale market for its product.
B)face similar demand curves for various markets.
C)have similar costs among markets.
D)have a downward sloping marginal cost curve.

Question

Quizplus · Accepted Answer

Price discrimination is the practice of charging different prices to different customers or markets for the same product or service. In order for this practice to be successful, the firm must be able to separate the markets based on their willingness to pay. This requires that there is an imperfect resale market, meaning that consumers are not able to easily resell the product to other markets. If there were an efficient resale market, the high-priced market would simply resell to the low-priced market, eliminating the possibility for price discrimination. Therefore, A is the correct answer. B and C are not necessary conditions for price discrimination, and D is not relevant to the concept of price discrimination.

For the Practice of Price Discrimination to Be Successful,the Monopoly