An important lesson of price discrimination is that:
A) price discrimination will always lead to lower profits in one of the two markets.
B) firms can increase profits by differentiating their product attributes.
C) all firms can perfectly price discriminate.
D) it only increases profits when the demand curves in two different markets are not the same.

Question

Quizplus · Accepted Answer

Price discrimination only leads to increased profits when the demand curves in the two different markets are not the same. This is because the firm can charge a higher price in the market with a lower elasticity of demand, and a lower price in the market with a higher elasticity of demand, increasing overall revenue and profitability. Choices A, B, and C are incorrect as they do not accurately reflect the main lesson of price discrimination.

An Important Lesson of Price Discrimination Is That