When a firm price-discriminates among consumers with different price elasticities of demand, it
A)has the same price-cost margin in each market.
B)sets up an auction to determine who will pay the most.
C)maximizes profit in one market while taking losses in another.
D)equates price and marginal cost in each market.
E)creates a deadweight loss in each market.

Question

Quizplus · Accepted Answer

Price discrimination can lead to deadweight loss because it results in different prices for different consumers, which can prevent some consumers from purchasing the good even though they value it more than the marginal cost of production.

When a Firm Price-Discriminates Among Consumers with Different Price Elasticities