In order for a firm to engage in price discrimination, it must be Select the correct answer below:
a) Able to separate consumers into different groups based on demand elasticities
b) A price taker Experiencing economies of scale in the relevant range of production
c) Producing in the inelastic portion of its demand curve to raise its price and increase total revenue

Question

23-11-2019
Business

contestada

In order for a firm to engage in price discrimination, it must be Select the correct answer below:
a) Able to separate consumers into different groups based on demand elasticities
b) A price taker Experiencing economies of scale in the relevant range of production
c) Producing in the inelastic portion of its demand curve to raise its price and increase total revenue

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Karabo99 Karabo99 · Answer 1 · 2019-11-23T09:50:04+01:00

Answer:

a) Able to separate consumers into different groups based on demand elasticities

Explanation:

A firm is able to practice the price discrimination when following conditions are fulfilled:

- The firm should have market power and must be a price maker.

- The firm must be able to differentiate its customer base into different groups based on their demand elasticity.

- The firm is able to stop the cross selling between different groups of customers that are charged different prices.

Therefore, For firm to engage to price discrimination, it must be able to separate consumers into different groups based on their demand elasticities.