Which of the following is true of price discrimination?
A)Customers need to have a unit elastic demand curve for price discrimination to occur.
B)Price discriminators lack the incentive to reduce their average total cost of production.
C)Customers can easily resell a good to other customers if there exists price discrimination in the market for the good.
D)Customers need to differ in their willingness to pay for price discrimination to occur.
E)Price discriminators profit by charging a uniform price to all customers.

Question

Quizplus · Accepted Answer

Price discrimination occurs when different customers are charged different prices for the same product or service based on their willingness to pay. Therefore, for price discrimination to occur, customers need to differ in their willingness to pay. A unit elastic demand curve (choice A) means that a change in price will result in a proportional change in quantity demanded, which does not necessarily affect price discrimination. Price discriminators have the incentive to reduce their average total cost of production (choice B) as it increases their profits. Customers being able to resell a good (choice C) also does not necessarily affect price discrimination. Price discriminators profit by charging a higher price to customers with a higher willingness to pay and a lower price to customers with a lower willingness to pay (choice E).

Which of the Following Is True of Price Discrimination