A firm practices price discrimination by selling at a high price in its larger market, Market A, and a lower price in its smaller market, Market B. If this firm is forced to sell at a single price in both markets and opts for the original price in Market A, the new single-pricing strategy makes consumers in:
A) both Market A and Market B worse off.
B) Market A no worse off but consumers in Market B worse off.
C) Market B no worse off but consumers in Market A worse off.
D) both markets better off, as single pricing is always better for consumers than price discrimination.

Question

Quizplus · Accepted Answer

If the firm is forced to sell at a single price in both markets and opts for the original price in Market A, then consumers in Market A are no worse off as they are paying the same as they were before. However, consumers in Market B are worse off as they were previously paying a lower price and are now forced to pay the higher price. Therefore, option B is the correct answer. Option A and D are incorrect because both markets cannot be worse off or better off, respectively. Option C is incorrect because consumers in Market A are not worse off under the new pricing strategy.

A Firm Practices Price Discrimination by Selling at a High