A monopolist engages in price discrimination
A) by charging a higher price to consumers whose demand is more elastic.
B) by charging a higher price when marginal cost is lower.
C) by charging a lower price to consumers whose demand is more elastic.
D) by charging the same price to all consumers.

Question

Quizplus · Accepted Answer

Price discrimination occurs when a firm charges different prices for the same product to different consumers. The goal is to capture the consumer surplus and increase profits. To engage in price discrimination, the firm must be able to identify and separate consumers by their willingness to pay. The firm charges a higher price to consumers with a lower elasticity of demand and a lower price to consumers with a higher elasticity of demand. This is because consumers with a more elastic demand are more sensitive to price changes and will be less likely to buy the product if the price is too high. By charging a lower price, the firm can attract these consumers and capture the consumer surplus. Therefore, the correct answer is C.

A Monopolist Engages in Price Discrimination