Which of the following requirements is necessary to practice price discrimination?
I. The firm must have market power.
II. The firm must be able to prevent arbitrage of its product.
III. The firm must face a perfectly elastic demand curve.
IV. The firm must operate in a perfectly competitive industry.
A) II, III, and IV
B) I, II, and III
C) I and II
D) III and IV

Question

Quizplus · Accepted Answer

Price discrimination requires a firm to have market power (I) and the ability to prevent arbitrage (II), ensuring they can set different prices for different consumers without those consumers being able to buy the product at a lower price and resell it. A perfectly elastic demand curve (III) and operating in a perfectly competitive industry (IV) are not requirements for price discrimination.

Which of the Following Requirements Is Necessary to Practice Price